Desse. (96-25360)

The Impact of Resource Efficiency Actions and Firm Performance, Moderating Role of Eco-
Investment and Production Cost
Chapter No. 1
INTRODUCTION
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1.0 INTRODUCTION
1.1 Significance of Firm Performance
At the outset, it is pertinent to comprehend the firm performance by considering multiple factors
and features. A number of research studies have already been conducted to quantify the firm
financial position while bearing in the mind a mixture of different aspects. The firm financial
performance, as a matter of fact, is a multidimensional terminology which may consist of various
associations with a number of multiple causes or reasons since it is generally related to the overall
organizational functioning and to the results generated by a firm’s day to day operations (Llopis &
Blasco, 2018). The financial performance of a firm is the determination of subjective nature that
how effectively a firm is utilizing its assets from the primary approach of doing business and how
consistently it generates the annual revenues. Typically, the firm’s financial performance involves
a general organizational performance, together with the production of goods and provision of
services, functioning and operations of various strategic business units (SBUs) and the overall
results accumulated by all of these procedures (Cainelli et al., 2011). The firm’s financial
performance identifies that how well a firm is generating the revenues and how well it is managing
its overall assets, liabilities and the general financial interests of its stakeholders. Hence, it is
undoubtedly worthwhile to put an emphasis on the reality where the firm’s financial performance
is mostly determined in terms of efficiency of the general operations and functions of the
concerned firms. Consequently, the more effective the firm’s operations are, the more positive the
organizational performance is (Albertini, 2013). The financial performance of a firm is a suitable
part of concentrations of related researchers in the curriculum of financial studies and it is
generally presented as a dependent variable for most of the time. Other multiple factors, for
instance, overall growth, firm’s profitability, employee’s retention, customer satisfaction, social
and environmental performance are some other related factors which are also utilized to be
associated with the firm performance in order to find out the financial performance of underlying
firm (Llopis & Blasco, 2018). However, the firm performance is broadly considered by the
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researchers since the financial management of any firm, irrespective of bigger or smaller in size, is
primarily interested to enhance and sustain the performance of its firm competitively for the long
span of time. In this research study, the financial performance of small and medium size
enterprises (SMEs) has been associated with the resource efficiency actions (REA) which are
generally considered to be important for minimizing the production cost for securing the
competitive advantages over the other firms which do not consider the strategies of resource
efficiency to be put into their general practices. Now, the concept of resource efficiency actions
need to be elaborated so that the relationship of these both variables can be further comprehended
and may be helpful for developing an appropriate awareness concerning with the subject.
1.2 Importance of Resource Efficiency Actions
The world has enjoyed multiple decades of its development based on exhaustive utilization of
natural resources. But nowadays, the world is continuously confronting the challenges to generate
the employment opportunities by ensuring the sustainability (Klewitz & Hansen, 2014). The
problems of global environment, for example, the drastic change in global weather that urgently
needs a suitable resolution by consistently increasing the societal awareness concerning the strong
impacts of the business functions on overall natural environment. To deal with these crucial
constraints and in order to convert these hurdles into opportunities, the world needs the major
conversions in consumer as well as in producer behaviors (Llopis & Blasco, 2018). There is a
group of research scholars who have articulated the concerns about the complexity of developing
and attaining the overall improvements in global environment without changing the existing social
and political patterns along with the standardizing ethical structures that typically direct the
decision making of any firm (Correa et al., 2008). Whereas there is another cluster of research
scholars who have purposely highlighted that the managers need to make a uniform structure for
the natural environment to understand it as a subjective as well as a strategic problem than as an
ethical problem only and those researchers are consequently the supporters of a strategic approach
for encouraging the alteration within the firms (Llopis & Blasco, 2018). All those parameters,
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necessary to save the natural resources, need to be put into actions by the firms whether bigger or
smaller. Giudice et al. (2017) inspected the matters that how the resource efficiency actions are
channelized for increasing the firm’s sustainability. However, the small and medium size
enterprises (SMEs) seemed to be suffering due to the weak resource planning because of the little
accessibility to financial aids (Rizos et al., 2015). Therefore, the stakeholders are putting more and
more pressures on the production and manufacturing firms for the enhancement of the firm
sustainability. Due to these pressures, the large and small firms are increasing their efforts for
making the sustainability of these firms better than before. All the activities which are significant
to sustain the better environment for a long period of time are categorized into eco-efficiency or
resource efficiency actions (the appropriate definition has been provided in methodology section).
However, the resource efficiency actions are the collection of some efforts that how an
organization can utilize its water and energy resources more efficiently and how it can effectively
manage the waste resources, in order to protect the natural environment and to dispose of
dangerous waste which cannot be reutilized. Schaltegger and Synnestvedt (2002) affirmed that the
eco-efficiency strategies unite the ecological and financial performance whereas these resource
efficiency actions also allow a reasonable organization of polluted material and promote an
appropriate utilization of energy. Therefore, the resource efficiency actions have been taken to
analyze their impact on the financial performance of small and medium size enterprises (SMEs).
1.3 Relationship of Resource Efficiency Actions and Firm Performance
In order to understand the relationship of resource efficiency action and firm’s financial
performance, the comprehension of previous research studies are considered helpful and therefore
the views and results of some related research studies need to be examined thoroughly. Many
researchers have developed a strong comprehension of those factors which determine the ultimate
affect of resource efficiency actions on environment as well on the financial performance of any
business (Barbieri et al., 2018). The relationship between the resource efficiency actions and firm
financial growth has appropriately received the researchers’ concentration in this decade
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(Colombelli et al., 2015). However, how resource efficiency actions affect the firm performance
has consistently been debated by the researchers (Llopis & Blasco, 2018). The general
understanding of financial managers show that the environmental strategies increase the
production costs but do not impact the firm’s financial position. Porter and Linde (1995) suggested
that both the firm and eco-efficiency actions can promote each other, by compliance with these
actions, the opportunities can be generated that eventually lead to higher returns for the long
period of time. Some studies present the results from negative to moderate and moderate to
positive correlations between firm performance and eco-efficiency (Albertini, 2013; Barbieri et
al., 2018). All of these arguments are generally based on the Porter’s hypothesis. According to
this, the efforts which are aimed at developing the overall environmental performances of a firm
may also gain the positive impacts on economic performance of that firm by enhancing the
product life cycle along with the appropriate development of production and manufacturing
processes (Colombelli et al., 2015). There is another view propagated by some researchers that all
the eco-efficiency actions are, as a matter of fact, not positively associated to the financial
performance of the small and medium size enterprises (SMEs) at least not for the short run (Llopis
& Blasco, 2018). Nevertheless, most of the empirical analyses have been carried out by multiple
researchers at both the macro and microeconomic level to focus on the possible determinants of
eco-innovative strategies, whereas comparatively a little attention has been rendered to its overall
effects on financial performances and economic growth. In some other words, only favorable
effects of resource efficiency actions are, by some means, considered by the researchers as a
hypothesis for motivating the related investigation (Colombelli et al., 2015). Therefore, all of these
blended results recommend that the impact of resource efficiency actions on firm performance is
multifaceted. As a matter of fact, the researchers could not build a consensus yet to understand the
relationship and this gap ultimately generates a need for interested researchers to examine it
furthermore. Hence, this research study aims at examining this less concentrated field of financial
performance assessment by examining the concerned effects of resource efficiency actions (REA)
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on financial performance of small and medium size enterprises (SMEs).
1.4 Tendency of Eco-Investment
Since every strategic business unit (SBU) need its own portion of finance in order to remain in
working condition, whereas the sustainability related initiatives are progressively more and more
encouraged by the investors, customers, along with the local and international environmentalists,
where the decisions for sustainability always remain in question (Pekanov et al., 2017). However,
the question is the sustainable firms gain more value or not? The research studies regarding the
said question in order to understand the affects of eco-investment for firm sustainability and its
overall impact on the financial performance of any firm has been increasingly addressed over the
last couple of decades, particularly when the corporations inquire about improvement of their
financial performances through investing in the sustainability oriented determinants. The resource
efficiency actions (as other SBUs) necessitate the finance for operating the related activities and
the same has been named as eco-investment. The eco-investment (also known as green
investment) is a type of a socially responsible investment where the investments are generally
made in those firms only where environmental friendly products and services are offered and
resource efficiency action are practiced. Llopis and Blasco (2018) affirmed that the results of their
research study indicate that the higher investment in resource efficiency strategies generate the
higher firm growth. A firm can be able to increase its financial performance by intensifying the
expectation of it consumers, stakeholders and shareholders through enhancing the environment
related investments. In the paradigm of small and medium size enterprises (SMEs), Ghisetti et al.
(2017) disclosed that the financial support of both short run and long run environmental
investments is essential irrespective of the larger or smaller firms. However, the primary focus is
on small and medium size enterprises (SMEs) and it is justified by considering that the difficulties
to get internal or external finance are one of the most pressing problems for the development and
to generate the investments for small and medium size enterprises (SMEs). The financial
constraints are also relevant to those ‘green investments’ which currently have a negative net
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present value and need additional public funds (subsidies or tax credits) to become competitive.
Llopis and Blasco (2018) asserted that the eco-investments offset the operational costs and
therefore it becomes the cause to increase the firm performance for the long period of time. The
intensity of investment in resource efficiency actions also play a moderating function to determine
the firms’ production, while insignificant effect has been found for the adoption and
implementation of investment in eco-efficiency actions (Antonioli & Mazzanti, 2009). Thus, the
amount of investment in eco-efficiency actions also affect the relationship between resource
efficiency actions and firm performance (Pekanov et al., 2017). It is pertinent to mention that in
this study, the investment refers to the amount incurred for maintaining the resource efficiency
actions only instead of an overall investment to start the business or to make a firm in functional
conditions.
1.5 Phenomenon of Production Cost
The total production costs can be accumulated by calculating the labor costs, direct materials and
the total factory overhead costs as well. The tendency of production cost while concentrating on
the resource efficiency actions has been analyzed by multiple researchers. At the outset, the
production cost due to the occurring of eco-investment tends to increase for the short period of
time but if the eco-investment is consistently increased for practicing the resource efficiency
action, in result the production cost will eventually start to decrease for the long period of time
afterwards (Llopis & Blasco, 2018). Multiple research studies showed that the resource efficiency
actions implemented during the process of production or manufacturing can reduce the production
cost and ultimately be able to generate the considerable saving possibilities. Most of these costs
saving possibilities are not only the direct material costs but also other hidden costs, for instance:
transportation, disposal, production and energy etc. Onut and Soner (2007) affirmed that as per the
size of industrial plants, there are a number of cost components related to the total cost of
production, for example the cost of raw material, labor cost, cost of maintenance, operational cost,
etc. Particularly in the small and medium size enterprises (SMEs), the cost of energy is rather a
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small amount of operational cost but reducing the production costs is predominantly significant
when it occurs to deal with the raw materials. The prices of raw materials are obviously a critical
factor for any business performance. Therefore, the savings from production costs will ultimately
increase the accumulated profit margin at the end. Eventually such savings from practicing the
resource efficiency actions become more important for generating future eco-investments.
Brouwers (2010) assessed that numerous sustainable innovations are aimed at improving the
technical processes of eco-efficiency to lower the cost of production. By saving the multiple
resources, the production cost will ultimately be starting for continuously decreasing up to the
optimal level and will therefore result in increasing the annual return of these firms. Vine et al.
(2010) analyzed the resource efficiency practices in small and medium size enterprises (SMEs)
being the strategies for generating a change to become more resource efficient and competitive by
modifying the manufacturing processes, reducing energy, water utilization, materials consumption
and by selecting the low impact or renewable resources. These actions can be altered with other
actions by evaluating the competency and capabilities of practicing firms. In this research study,
the moderating impact of production cost, when it tends to increase or decrease, is also assessed.
The trend of decreasing in production cost will ultimately start after consistently investing in the
resource efficiency actions by considering the strength of eco-investment. Hence, the moderating
role of both eco-investment as well as production costs is to be examined so that the overall
benefits for the small and medium size enterprises (SMEs) can be understandable for the
producers and manufacturers of these firms.
1.6 Consequences of SMEs Sector
Despite the fact widespread for recognition of the vital functions performed by the small and
medium size enterprises (SMEs) in developed and emerging economies, the competitive approach
of small and medium size enterprises (SMEs) have attracted a limited concentration of researchers
as compared to the larger firms (Llopis & Blasco, 2018). The small and medium size enterprises
(SMEs) were considered as secondary being the remaining insignificant classes of firms that were
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somehow failed to grow into the bigger firms. These were the firms which habitually used the
older managerial practices and which occupied the minor portion of the markets. Consequently,
those firms were less likely to practice the strategic investigation and tactical planning practices
(Linan et al., 2019). Later on, the research scholars concentrated to focus on the certain types of
advantages which are generally available in the paradigm of smaller firms only and therefore the
research studies initiated by some researchers to demonstrate the usefulness of various tactics and
strategies for understanding the functionality of these small and medium size enterprises (Correa et
al., 2008). It was asserted that the small and medium size enterprises (SMEs) are able to gain
advantage through practicing the flexible strategies to produce customized products and services
for some specific segments of the markets where the only weakness is the lack of necessary
resources. The worth of small and medium size enterprises (SMEs) in economic growth of a
country has been recognized by the researchers since a couple of decades. Ayandibu and
Houghton (2017) disclosed that in most of the developing countries, the participation of small and
medium size enterprises (SMEs), to generate the employment, was much significant. Jamali et al.
(2017) argued that with recognition of small and medium size enterprises (SMEs) importance, the
researchers started to focus on the activities of small and medium size enterprises (SMEs). These
small and medium size enterprises (SMEs) were the central force for boosting up the economic
conditions of a country (Rahman, 2013). The production firms may put their efforts to decrease the
environmental effects by minimizing the waste and reduction of pollution techniques. (Ghisetti et
al., 2017) elaborated that these small and medium size enterprises (SMEs) were the largest
providers of employment in most of the countries. These were also the important contributors for
technological inventions and for creating the values by expansion of new products and services, so
these small and medium size enterprises (Ayandibu & Houghton, 2017):
a. Foster the concept of entrepreneurship and sole proprietorship;
b. Employ the youth of a country that helps to lessen the crime rates;
c. Assist for flexible economic environment by linking small and large firms;
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d. Use labor intensive production processes than the large enterprises;
e. Boost up the employment and lead to the reasonable distribution of wealth;
f. Supply the source of living through easy activities in agriculture based economies.
1.7 Background of Study
A collection of previous studies analyzed the relationship of resource efficiency actions and firm
performance (Barbieri et al., 2018) where the researchers gathered the previous studies
commenced over the last couple of decades, while no common consensus to understand the direction
and extent of this relationship was presented (Llopis & Blasco, 2018). The US President’s Council
on Sustainable Development published a wide report on resource efficiency where the council
described the sustainability as, “the means of maintaining the economic growth by producing
minimum contamination, refurbishing the prior ecological damages, utilizing less non renewable
resources, with minimization of waste and increasing the chances to survive in a healthy
atmosphere for the entire population” (Cote et al., 2006). The resource efficiency deals with
generating greater value by using minimum materials and energy. As a matter of fact, the world
has been enjoying the utilization of natural resource for many decades and this utilization went
beyond the expectations with the globalization and a drastic increasing in world population. Lentes
et al. (2017) elaborated that the recent research studies illustrated the trends for the coming years.
It is said that the population of entire world will increase 2.3 billion by 2050, so the resource
utilization will also be increased by 2.3 times (WWF, Global Footprint Network & ZSL Living
Conservation 2012). These studies created the need to limit the growth (Meadows et al., 1972), to
rethink the way of living and doing any business (Lentes et al., 2017). Therefore, the producers of
different industrial activities need to justify the procedures of production and manufacturing by
utilizing various resources so that the resources are to be utilized as efficiently as possible. The
challenges of eco-efficiency must be taken in prior consideration, so that the environmental risks
can have the least impact (Blackburn, 2004). In preceding couple of decades, the world economy
increased into double and it also doubled the use of natural resources. The economy has become
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five times larger than five decades ago. Lentes et al. (2017) argued that the suitability of resource
utilization created the need to determine the firms’ manufacturing actions.
1.8 Importance of Study
Bearing in view the importance of small and medium size enterprises (SMEs), resource efficiency
actions and the disagreement in determination of the relationship between these both as mentioned
in above paragraphs, a research student is stimulated to go ahead for further exploration of this
critical need of the era. Based on the arguments elaborated above, it is to be understood that this
study is important for an emerging country like Pakistan since it inspects the relationship of
resource efficiency actions and the financial performance of small and medium size enterprises
(SMEs) in terms of sales growth. The specific sector of small and medium size enterprises (SMEs)
is selected since it is generally neglected by the researchers due to its minute contributions in any
country’s economy development as compared to large firms (Azorin et al., 2009). The eco-
efficiency refers to the multiple actions, for instance saving the water, saving the energy, saving
the material, minimizing the waste, recycling, selling the scrap to other firms and the renewable
energy etc., and there may be other actions also to implement in order to protect different natural
resources. These actions are primarily focused to determine the overall relationship with SMEs
performance. Meanwhile it is pertinent to elaborate the importance of small and medium size
enterprises and resources efficiency actions along with their relationship.
1.9 Survey for Identification of Resource Efficiency Actions
A survey of 150 small and medium size enterprises (out of about 200 firms) has been conducted to fetch
the information to evaluate the relationship of resource efficiency actions and the financial
performance of small and medium size enterprises where the registered small and medium size
enterprises (SMEs) of this sector in Lahore Chamber of Commerce is approximately 200 or more,
whereas most of these small and medium size enterprises (SMEs) are not registered with the
regulating authorities. The sample size has approximately been considered 60% which was
appropriate to go forward for further implication of statically and econometric techniques. After
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receiving the duly filled in questionnaires where only those small and medium size enterprises
(SMEs) involved in producing iron and steel industrial along with the consumer products has been
considered. Furthermore, it was rather a tactical way to acquire the concerned facts and figures
from the owners or focal personnel of these small and medium size enterprises (SMEs) where the
research student has himself interviewed the authority of these small and medium size enterprises
(in case where the focal person is illiterate and not able to read and understand the medium of
English) and the same questionnaires has then and there been filled in simultaneously. Moreover,
where the representatives of these firms were capable of understanding the second language, the
questionnaires were disbursed and the focal persons were requested to response accordingly. The
questionnaire was consisted of multiple sections for gathering the appropriate information
regarding saving energy, saving water, saving material, selling scrap to other firms, minimizing
the waste and renewable energy which has been entered in an Excel Data Sheet and SPSS has also
been used for analysis of descriptive statics simultaneously.
1.10 Statement of Problem
The world is facing the challenges of resource scarcity over the last couple of decades (Klewitz &
Hansen, 2014). The sector of small and medium size enterprises (SMEs) generally does not
recognize the risks of resource insufficiency (Wright, 2001). The small and medium size
enterprises (SMEs) commonly deal with inadequate resources including finance and investment
but yet these small and medium size enterprises (SMEs) are not willing to carry a long
implementation and bear extra cost for resource efficiency strategies (Buonanno et al., 2005). In
addition, the researchers usually focus on resource efficiency actions by referring the larger firms
and developed countries only (Azorin et al., 2009), whereas the effects of small and medium size
firms along with the emerging economies are still unidentified but significant (Cassells & Lewis,
2011). The sector of small and medium size enterprises (SMEs) is reasonably important; therefore
the concern of resource efficiency actions is suitable (Ghisetti et al., 2017). Thanki et al., (2016)
stated that since the energy prices are constantly rising, the execution of environmental policies is
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becoming strict gradually. Thus, the small and medium size enterprises (SMEs) critically need to
make some strategies to become resource efficient.
1.11 Contributions of Study
The proposition of this research study is to contribute its part in previous literature in multiple
ways. The researchers have paid a little concentration on the relationship of resource efficiency
actions and firm performance (Jo et al., 2015). The bigger firms received more intensions of the
researchers since these firms significantly contribute their effort for economic development of any
country. Since the sector of small and medium size enterprises (SMEs) is economically significant,
the investigation of resource efficiency actions is appropriate because the expenditures for
investing in eco-efficiency for the short run is considerably high and these small and medium size
enterprises (SMEs) generally confront the financial constraints than the bigger firms (Ghisetti et
al., 2017). Moreover, there is an implicit need to illuminate the problem of resource insufficiency
as well as inefficiency of their utilization. Thus, a generally neglected sector of small and medium
size enterprises (SMEs) under the context of developing and emerging country has been selected,
keeping in view the above mentioned standpoints, to access the aforesaid relationship.
1.11.1 Theoretical Contributions
This study theoretically support the concepts of multiple research studies (mentioned in the section
of literature review) where the phenomenon of eco-efficiency and form performance has been
examined. It disclosed that initially the implementation of resource efficiency actions generate a
negative impact on the financial performance of small and medium size enterprises because the
production cost tends to increase for the short run. Whereas the aforesaid relationship becomes
positive when the production cost eventually tends to decrease for the long run. Moreover, in this
research study, the role of eco-investment will also be discussed and it seems (by developing the
understanding while a number of relevant research studies were read and mentioned in the section
of literature review) that the intensity of eco-investment determines the number of resource
efficiency actions to be executed. The number of resource efficiency actions can be varied that is
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based on availability of eco-investment. Hence, the eco-investment also affects the financial
performance of small and medium size enterprises negatively for the short run and vice versa.
1.11.2 Practical Contributions
This research study targets the sector of small and medium size enterprises (iron and steel
industry), where the multiple resources (e.g., water, material, and energy, etc.) are continuously
being indulged for production purposes. This study will stimulate the intentions of concerned
producers to implement the resource efficiency actions in order to be more efficient and effective
not only for their annual returns (in terms of sales growth) but also for an overall environment to
resolve the ecological problems or at least prevent from further spoiling. Moreover, this study will
spread the relevant appropriate information and awareness concerning the eco-efficiency strategies
typically prevailing in the sector of small and medium size enterprises (iron and steel industry) and
furnish the competitive advantages of being resource efficient over the other firms in which these
resource efficiency actions are not being performed. The producers can be able to understand the
overall benefits in terms of their business performance by practicing the resource efficiency
strategies along with the environmental related reimbursements. Hence, this study will practically
instigate the thought of saving and securing the resources for increasing the firm performance (in
terms of annual returns) and also the thought of protecting the environment.
1.12 Research Questions
RQ 1: Does the implementation of resource efficiency actions affect the financial performance of
small and medium size enterprises?
RQ 2: Do the “eco-investment” and “production cost” moderate the link of resource efficiency
actions and financial performance of small and medium size enterprises?
1.13 Research Objectives
Bearing the aforesaid research questions of this research study in mind, the subsequent objectives
have been drawn rationally so that the research student may be able to keep the research procedure
on an appropriate track.
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a. To evaluate the relationship of resource efficiency actions and firm’s financial performance
of small and medium size enterprises (SMEs) whether it is negatively associated with each
other or vice versa.
b. To also assess the moderating role of eco-investment as well as the impact of production
cost on the relationship of resource efficiency action and the financial performance of
small and medium size enterprises (SMEs).
c. To signify the worth of small and medium size enterprises (SMEs), resource efficiency
actions (REA) and the overall role of emerging economies, since the sample has been taken
from a developing country.
1.14 Research Limitations
This study selects the sample of small and medium size enterprises (iron and steel industry) that
consists of only those firms which are located in north Lahore Pakistan and does not include other
regions of the city and country as well. Moreover, the sector of production under the flagship of
iron and steel industry has only been taken for analyzing the relationship of resource efficiency
actions and firm performance whereas the small and medium size enterprises (SMEs) firms
producing the goods from other materials ( i.e., timber, rubber, plastic and handicraft etc.) has been
neglected since the sampling method was purposive. The entire sample just considers the
production and manufacturing industry only but deliberately leaves the service sector a side. The
sample can be increased by considering the small and medium size enterprises (SMEs) of same
sector located in other regions of the country to assess the generalizability. Furthermore, rest of the
small and medium size enterprises (SMEs) like timber, rubber, plastic and handicraft etc. can also
be included by lengthening the sample size.
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Chapter No. 2
LITERATURE REVIEW
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2.0 LITERATURE REVIEW AND DEVELOPING HYPOTHESIS
The role of small and medium size enterprises (SMEs) in development of the economy of
developed countries or developing countries can never be denied and the functions of this sector
has rationally been identified by the various investigators (Ayandibu & Houghton, 2017). It has
been revealed by exploring the previous research studies that in most of the developed and
emerging economies, the contribution of small and medium size enterprises (SMEs) to create the
employment is considerably important. Chris at al. (2006) argued that with the identification and
recognition of enormous consequences of small and medium size enterprises (SMEs), the several
research scholars initiated to concentrate on the variety of actions and functions performed by this
sector. Ayandibu and Houghton (2017) elaborated that these small and medium size enterprises
(SMEs) are the innermost strength for increasing the trade and industrial situations of any nation in
the world. Rafique and Ahmad (2018) affirmed that the manufacturing and production processes
in these small and medium size enterprises (SMEs) and their all sorts of endeavors may be
directed to shrink the inverse ecological impacts by lessening the wastage and contamination
practices. Ghisetti and Rennings (2014) elaborated that these small and medium size enterprises
(SMEs) are one of the major providers of employment opportunities in emerging countries. Beside
this, these small and medium size enterprises (SMEs) are also the significant suppliers for
industrial innovations and for generating the potential possibilities by developing the new services
and products. Consequently, these small and medium size enterprises (SMEs) foster the concept of
entrepreneurship and sole proprietorship, employ the youth of a country that helps to lessen the
offense rates, help for flexible economic environment by linking the smaller and larger firms, use
the labor intensive production procedures than the large enterprises, boost up the employment and
lead to the reasonable distribution of wealth and supply the source of living through easy activities
in agriculture based economies (Ayandibu & Houghton, 2017).
The idea of small and medium size enterprises (SMEs) and sole proprietorship (entrepreneurship)
growth was at the very first pioneered as early as the late 1940’s by introducing the targeted
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policies, establishment, organization and support for these small and medium size enterprises
(Ayandibu & Houghton, 2017). In the said research paper, the investigators elaborated the
significance of the sector of small and medium size enterprises (SMEs) and they expressed a
mutual consensus with the World Bank that the small and medium size enterprises (SMEs)
generally contribute the subsequent essential enhancements to the economy of any country, the
small and medium size enterprises (SMEs):
1. are the engine of development 3. are critical for lessening the poverty
2. are necessary for a competitive market 4. make vital roles in emerging economies.
The small and medium size enterprises (SMEs) are usually situated outside the general
urban cities (Commission & Market, 2018). This may be basically because where the
general opportunities for business conveniently is available, exactly there the sole
proprietorship intend to establish these small and medium size enterprises (SMEs). These
firms also look for the availability of cheap labor force to run the production and
manufacturing processes. Therefore, these small and medium size enterprises (SMEs)
intend to be established so that the work force can conveniently be available on affordable
wage rates. Whatsoever the appropriate reasons may be, the standpoint is actually that the
economic activities outside the major urban areas leads to multiple job creation activities
and helps to reduce the poverty of rural areas as well (Oxborrow & Brindley, 2013). It is
the fact that not each and every small and medium size enterprise (SME) is established in a
non-metro area, of course, but in both areas the non metro and metro, the small and
medium size enterprises (SMEs) assist to reduce the level of poverty through the provision
of employment opportunities, personnel training and general development actions as well.
When this sector is considered to be evaluated in any regard, the researchers generally
provide the concerned background of all the related important factors so that the readers
may be able to appropriately understand the importance of this sector along with the
overall impacts of this sector on the economy of any country. After understanding the
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enormous significance of small and medium size enterprises (SMEs), now the research
studies related to this crucial sector has been presented for further comprehension of
related features. Clarke (1972) stated that the first comprehensive research study, regarding
the small and medium size enterprises (SMEs), was initiated by the Bolton Committee of
Inquiry where the researchers identified subsequent three major characteristics of small and
medium size enterprises (SMEs): the legal independence, small share of entire market and
the management controlled by an individual. Rainnie (1989) assumed that the industrial
relations are non problematic in small and medium size enterprises (SMEs) for both the
management and the workforce, but Goss (2015) stated that there is no evidence for the
view that the small and medium size enterprises (SMEs) develop industrial harmony or
synchronization between employer and employed.
Clarke (1972) argued that the production process is much flexible in the paradigm of small
and medium size enterprises (SMEs) than those of the large firms. At the same time, as the
small and medium size enterprises (SMEs) usually experience the common barriers, for
instance, inconvenient to plan, shortage of capital and resources, need technical expertise
and skills with minimum research and development activities as well. Wright (2001)
explored that the small and medium size enterprises (SMEs) usually do not understand the
environmental problems and its associated risks. Therefore, these small and medium size
enterprises (SMEs) generally lack their intentions to practice the concerned crucial
activities for overall environmental improvements since these small and medium size
enterprises (SMEs) do not have access to the suitable information and all the relevant
resources.
Bearing the hurdles of this sector in mind, the relationship between small and medium size
enterprises (SMEs) and eco-environmental activities need to be explored. Several research studies
from previous literature strengthen the relationship of small and medium size enterprises (SMEs)
and resource efficiency strategies (Jenkins, 2009). The issues of eco-environmental tactics have
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somehow the correspondence concerned with the diversified streams, for instance, the employee
retention, corporate social responsibility, environmental prevention, resource efficiency actions and
the management of stakeholders etc. Although the eco-environmental actions are usually focused
on the large companies, but it is also necessary for small and medium size enterprises (SMEs) to
properly engage in these resource efficiency activities as a manner to improve their market
competitiveness (Azorin et al., 2009). It has been observed that the small and medium size
enterprises (SMEs) generate most of the positive aspects associated with the industry and are also
responsible for most of the negative environmental effects as well. The small and medium size
enterprises (SMEs) do not produce the large economic or environmental impacts individually, but if
this entire sector is considered together, these small and medium size enterprises (SMEs) have an
enormous impact concerning the overall environment (Klewitz & Hansen, 2014).
The appropriate awareness regarding the importance of social and political perspectives in
developing the understanding related to the environmental responsibilities is gradually increasing at
corporate level (Babiak, 2010). When the eco-efficiency responsibilities are focused, the large firm
are normally perceived more attentions to be accountable for generating the climate change and
resource reduction (Catarino et al., 2015). When the researchers talk about this sector, a general
misconception regarding the small and medium size firms (SMEs) also arises that the micro firms
are not normally aware of the negative environmental impacts of their production and
manufacturing operations and also lack the interest in practicing the environment related activities
(Bij et al., 2018). Moreover, there is another viewpoint that the small and medium size enterprises
(SMEs) typically provide a very little information regarding the strategies and their financial
performance (Brouwers, 2010) and this approach contributed to the fact that the small and medium
size enterprises (SMEs) are therefore less studied and investigated by the researchers.
Having understood the overall context of small and medium size enterprises (SMEs) and resource
efficiency actions, the phenomena of sustainability also need to be explored for further
comprehension of relevant factors. The terminology of sustainable growth has repetitively been
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used since the report “Our Common Future” has been published in 1987 by the World Commission
on Economic Development. This term is usually defined as “to meet the needs of present without
compromising the ability of future generations to meet their own needs” (WCED, 1987, p. 43). In
this report, the World Commission on Economic Development (WCED) emphasized the adoption
of economic, environmental and social rules to gain the overall sustainable growth. But, this
statement presented a critical challenge for smaller as well as for bigger firms that how the social
and environmental integration can in fact be attained with an economic prosperity. This conflict can
also be experienced intensively between academics and practice, since it is generally argued by
various researchers that there is an inherent disagreement between the protection of environment
and performance of business (Lee, 2009).
However, this crucial consensus is yet to be made by the research scholars. Giudice et al.,
(2017) suggested that the manufacturers in small and medium size enterprises (SMEs) can
implement the cleaner product concept for reducing the pollution, environmental impacts,
waste and scrap along with implementing the concept of eco-efficiency for minimizing the
utilization of energy, material and other related resources. Hemel and Cramer (2002)
showed that not the less than one third of 77 participating small and medium size
enterprises (SMEs) achieved the success by practicing in eco-efficiency actions such as
remanufacturing and reducing the production waste. Clarke (1972) disagreed with the
proposition and affirmed that the manufacturing progressions can somehow be adjustable
in the paradigm of small enterprises than the large firms but these small and medium size
enterprises (SMEs) frequently confront the multiple hurdles which ultimately compel the
producers of this sector to avoid the practices of eco-environmental activities. Wright
(2001) argued that the small and medium size enterprises (SMEs) do not generally
comprehend the overall environmental hazardous, therefore this sector typically is deficient
in practicing the environment related developments.
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Furthermore, there are some other research studies which concluded the standpoint as the
aforesaid researchers. Revell and Blackburn (2004) explored that in small and medium size
enterprises (SMEs), a very least amount of environmental reforms is considered to be
important as compared to the activities of generating revenue and gaining financial
support. However, the benefits of eco-efficiency actions always remain ambiguous (Del
Giudice et al., 2017) because the small and medium size enterprises (SMEs) confront
various inherent barriers such as limited space, poor infrastructures, additional work force
and financial scarcity. The small and medium size enterprises (SMEs) have been taken a
serious challenge in order to make contributions to the sustainable environment of the
society (Jamali et al., 2009). With the intention of converting the conceptual framework
into the sustainable growth, the small and medium size enterprises (SMEs) need to target
the Corporate Sustainability (Schaltegger et al., 2017). Another significant aspect of the
corporate sustainability is performing the eco-efficiency strategies (Dyllick & Hockerts,
2002) and enhancing the overall environmental situations by keeping the utilization of
natural resource at the minimum level voluntarily.
Lentes et al. (2017) recommended that the rapid increase in the world population, the
appropriateness of utilization of natural resources and the present propensity of metropolitan cities
generates the requirement to decide the production and manufacturing processes along with the all
other economic actions of the larger and smaller industrial firms. By performing the eco-efficiency
actions, the manufacturing procedures of the firms, whether bigger or smaller are objected for not
only optimizing the overall positive and favorable effects on the surroundings, but also for
minimizing the negative and inverse impacts.
The current investigation studies demonstrated the severe tendency for the coming years. It has
been presumed that the residents of this world would be increased by 2.3 billion till 2050.
Furthermore, the utilization of resources will also rise by 2.3 times as well. These research studies
generated the necessity to bind the development and to alter the techniques and ways of livelihood
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as well as doing any kind of business activities. As an end result, the current industrialization
behavior requires to be optimally justified the procedures of manufacturing and producing the
different goods and services along with the tendency of resources, in fact need to be used and
should be revised effectively and efficiently.
The entire debate as a matter of fact deals with not only the power and energy but also other factors
of productions as well. In addition, a drastic transformation in consumption of gas, water, oil,
electricity, raw material, capital, personnel and the removal of these resources requires to be
improved accordingly. It is the need of era to rethink the matters of energy progression; renewable
energy resources such as gas, oil, coal along with the uranium to be modernized. The strategies of
resource efficiency actions are required for producing the goods, so that the consumption of
diversified resources can be optimized (Lentes et al., 2017).
In order to gain the sustainable and competitive superiority among the firms, the concept of
eco-efficiency should combine with the environmental and economic performance
(Schaltegger et al., 2017) and it will ultimately permit a sensible management of
contaminated material and energy utilization among the most resource indulging industries.
Klewitz and Hansen (2014) suggested that the eco-efficiency actions are the initial step for
the small and medium size enterprises (SMEs) towards the corporate sustainability. There
is a general perception that the environmental damages are the utmost cost for generating
the economic progress. But the modern researchers perceive that a clean economy can
generate more economic development and prosperity than wasting of crucial resources.
Consequently, taking the care of environment will not slow down the economic growth but
it will rather help to identify the specific areas of inefficiency where the resources are
being wasted (Revell & Blackburn, 2004). Many small and medium size enterprises
(SMEs) are dealing with insufficient resources and are not voluntarily willing to perform a
lengthy implementation and put additional costs for resource efficiency actions (Buonanno
et al., 2005). The limited expertise and scarce opportunities to execute the resource
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efficiency actions are among the critical factors which affect the small and medium size
enterprises (SMEs) abilities.
There are some researchers who elaborate the idea of eco-environment in way where the
firms will be able to generate potential opportunities to prosper in diversified segments of
the markets. Revell & Blackburn (2004) suggested that to protect the environment creates
new business opportunities because there are huge economic benefits in reducing the
waste, minimizing the pollution and utilizing the resources more effectively and efficiently.
Therefore, reducing the emission of pollution and saving the resources from wastage by
using new technologies will lower the overall costs (Giudice et al., 2017) and in result it
will increase the product value along with the community perception regarding that
specific industry being environment oriented firms. The need is to emphasize on voluntary
resource efficiency actions to be taken by the industries on a win-win principle (Revell &
Blackburn, 2004). The concerns of eco-efficiency strategies and resource efficiency actions
along with the integration of firm sustainability are the central challenges for the
manufacturers of small and medium size enterprises (SMEs). These challenges are due to
the inherent and intrinsic constraints of small and medium size enterprises (SMEs) such as
the lack of capital, time, skills, space, knowledge, and intellectual resources (Woolman &
Veshagh, 2006) and all other issues related to small and medium size enterprises (SMEs)
management, structure, paradigm and processes of production and manufacturing (Jenkins,
2009). The small and medium size enterprises (SMEs) need the stakeholders’ collaboration
to confront the challenges to deal with the resource scarcity (Lepoutre & Heene, 2006).
Abreu et al. (2016) elaborated that the environmental efficiency shows the proportion of
economic worth which create the environmental affects. It can be determined by one of
two possible ways, first either by decreasing the environmental effects whilst retaining the
same level of economic output or second by increasing the value of economic output whilst
keeping the level of environmental impact constant (Schaltegger et al., 2017). Thus, the
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researchers focus on the first measure of decreasing the environmental effects, for instance
by reducing the usage of resources by putting the resource (such as energy, materials,
water) efficiency actions into implementation or by reducing the emission of pollution. To
avoid the emission of pollution, minimizing the wastage and reducing the environmental
impacts are described in terms of eco-efficiency (Studer et al., 2008). Furthermore, water,
energy, raw material, resource efficiency actions, waste minimization or management of
pollution are the multiple proportions of environmental efficiency and affectivity
(Verfaillie & Bidwell, 2001).
The researchers argued that the small and medium size enterprises (SMEs) have, by hook
or by crook failed to deal with the environmental impacts and environmental
transformation (Peters & Turner, 2004). Therefore, the situation needs to be tackled if the
polluter firms are moved from simple pollution reduction methods towards waste
minimization and resource efficiency actions. These strategies emphasize the small and
medium size enterprises (SMEs) to lessen the possible wastage and cost reduction for
generating diversified opportunities (Ayandibu & Houghton, 2017). These newly generated
opportunities can be recognized when the small and medium size enterprises (SMEs) are
collectively convinced, encouraged and properly guided to take some voluntary initiatives
on their own part (Buonanno et al., 2005). But the implementation of resource efficiency
actions requires some appropriate resources and technical abilities that are unluckily not
accessible by the small and medium size enterprises (SMEs) because of the scarcity of
multiple resources required for eco-efficiency strategies.
The eco-efficiency insures to provide maximum worth with minimum inverse
environmental impact. This motive can be achieved by improving the innovative efforts,
both during the production processes and while assessing the environmental performance
of products (Abreu et al., 2016). Then, the most terrible impacts of production processes
should be eliminated on any stage by observing full product lifecycle and simultaneously
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identify the alternative opportunities. Abreu et al. (2016) provided the detail concerning the
concept of eco-efficiency which refers to protect the nature by saving the resources
(Martinez et al., 2016). The resource efficiency can be attained with:
a. lessening the materials e. promoting renewable and local resources
b. decreasing the energy f. improving the products durability
c. reducing the level of toxic matters g. increasing the utilization of services
d. using the end of life strategies
The resource efficiency can also be attained by remanufacturing (Vogtlander et al., 2017) that is
“conversion of used or end of life products to at least its usual performance with a guarantee
that will approximately be equivalent to or even better than that of the recently manufactured
goods”. For all the products which include the energy exhaustive substances, the strategy of
remanufacturing is useful to lower the negative impacts on environment (Schaltegger et al.,
2017). Furthermore, there are the great effects on overall environment related to the processing
of raw materials especially when it is dealing with the scarcity of materials. Thus the motive of
resource efficiency can be attained by remanufacturing that will lower the overall
environmental impacts gradually (Pacheco et al., 2017). The awareness regarding the
importance of social and political factors in developing the environmental responsibility is
gradually increasing at corporate level (Beck et al., 2005). When the eco-efficiency
responsibilities are focused, the large firms are usually perceived more accountable for
creation of climate change and for the reduction of resources (Lee, 2009), because it is a
general misconception regarding the small and medium size enterprises (SMEs) that the micro
firms are normally unaware of the negative environmental impacts of their production
processes and also lack the interest in practicing the ecological strategies (Buonanno et al.,
2005). The small and medium size enterprises (SMEs) generally provide a very small
information concerning the strategies and the relevant financial performance (Wahid & Ali,
2017) and this approach contributes to the fact that the small and medium size enterprises
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(SMEs) are consequently less investigated.
To compete with innovative firms, the small and medium size enterprises (SMEs) must
concentrate on operational performance and on ecological impacts through implementation
of eco-environmental strategies (Trianni et al., 2013). Prior research studies indicated the
positive affect of environmental efficiency on firm’s financial performance and its
competitiveness. The competitiveness and industrial globalization of manufacturing and
production firms have rendered the great potential opportunities for the small and medium
size enterprises (SMEs) to develop internationally (Abreu et al., 2016). In this way, the
small and medium size enterprises (SMEs) can be cost effective and quality oriented firms.
However, this opportunity critically insists the small and medium size enterprises (SMEs)
to assert the rules and relevant constraints to practice the ecological responsibilities and
also to put different manufacturing models together which can result in a zero waste
production (Tan et al., 2014). The demands for environmental responsibility necessitate
that the small and medium size enterprises (SMEs) need to design the products and
processes by focusing on lessening the volume of materials and waste and healing of
concerned resources than burying or burning them at all (Vine et al., 2010). Since the
energy prices, global warming and pollution are consistently increasing, as a result the
implementation of environmental protection rules is turning into strict and obligatory.
Consequently, there is a critical requirement for the small and medium size enterprises
(SMEs) to prepare their manufacturing models along with the production to be more
competitive and globalized accordingly.
The researchers suggest that the small and medium size enterprises (SMEs) need to search
for cooperation to confront the constraints of resource scarcity (Rexhauser & Rammer,
2014; Jenkins, 2009; Vogtlander et al., 2017; Rafique & Ahmad, 2018). The role of
collaboration can obviously play an important part to boost up the eco-efficiency activities.
The small and medium size enterprises (SMEs) can be able to get a broader view of
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environment when these confront to examine the external expertise and the possible
benefits of resource exchanges (Linan et al., 2019). Clarke and Roome (1999) pointed out
that the companies should connect to multiple parties for collaboration to attain external
knowledge of organizational premises. Spence et al. (2012) recommended that the small
and medium size enterprises (SMEs) may work together and make an association to
acquire the knowledge and to swap the appropriate information. Lepoutre and Heene
(2006) indicated that the small and medium size enterprises (SMEs) are recommended to
look for association to decrease the knowledge and time constraints.
After elaborating the concerned prior literature of small and medium size enterprises (SMEs)
along with the resource efficiency actions, the research investigation related to the
relationship of eco-environmental strategies and the firm performance need to be provided
for further comprehension of the interested variables. When the resource efficiency actions
and firm performance have been discussed, the compilation of some preceding experimental
research studies has been examined to understand the relationship of firm performance and
eco-efficiency actions (Barbieri et al., 2018). In order to assess the prior literature related to
the resource efficiency actions and firm performance for an overall comprehension of the
affects of environmental actions on financial development of small and medium size
enterprises (SMEs), the subsequent research studies can obviously be considered for an
appropriate guidance. Llopis and Blasco (2018) stated that the researchers of this particular
context can just collect the prior empirical research investigations on the relevant subject
matter for the previous couple of decades; however beside these research studies, yet not a single
mutual agreement for understanding the overall direction of causality and the degree of this
association is accessible.
Since the actions for resource efficiency are anticipated to generate an optimistic affect on
entire environment, however the concerned impact of these resource efficiency actions on
the performance of small and medium size enterprises (SMEs) is yet a complicated one
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(Correa et al., 2008). During the couple of previous decades, a traditional economic
perspective was described that an extra expenditure will have to be incurred in shape of
investing in these activities of resource efficiency to reduce the impact of greenhouse gasses
but it has to be understood and identified that the results of this investment will not furnish
the instant reimbursement (Riillo, 2017). As a result, the supplementary cost will ultimately
decrease the ability of competitiveness of these small and medium size enterprises (SMEs).
However, there is another point of view turned up a couple of decades ago where the
researcher disagreed with the conventional perspective in a way that the specific investments
related to the actions of eco-efficiency will eventually remove the affect of that early cost of
operations and will also increase the performance of firm for the period of a long time
(Llopis & Blasco, 2018).
At the present time, the multiple researchers are putting the stress on win-win strategies in a
way where the overall ecological situations can be improved without decreasing the annual
profits of the firms. Ghisetti and Rennings (2014) asserted that the well organized resource
efficiency actions can in fact boost the performance of firm by raising its overall production
level. As per these researchers, if the regulations concerning to the eco-innovation are
implementing appropriately, as a result the related firms can be able to achieve the benefits
from implementation the ecological actions in terms of financial performance (Llopis &
Blasco, 2018). Therefore this standpoint gained a great concentration of the concerned
researchers since it presents an opposite standpoint against the traditional standpoints which state
that the eco-efficiency actions do always put an inverse impact on financial development of the
firms (Linan et al., 2019).
In the subsequent paragraphs, a concise literature of the existing research studies along with
the financial impacts of eco-environmental strategies and firm performance has been
presented. In these research papers, various factors have been determined to examine the
financial performance of different firms, for example the output, expansion (sales growth) and
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the financial measures (i.e., return on sales, operating margins, Tobin’s Q ratio etc.). The
following table presents a summarized form of the concerned research studies along with the
implemented factors to determine the firm’s financial performance accordingly.
Doran and Ryan (2012) employed the sample of cross sectional data of some Irish firms in
order to inspect that all those firms that perform the ecological tactics are likely for
achieving the higher earnings per employee as compared to those firms which generally do
not perform these strategies. Same like, (Hojnik & Ruzzier, 2016) inspected the Slovenia’s
firms for determining the strategies to be the resource efficient firms along with the tactics
which normally do not inversely affects the general performance of the selected firms.
Przychodzen and Przychodzen (2015) selected the different Polish and Hungarian firms. The
investigators recommended that all the strategies of resource efficiency do not generally
impact the firm performance (in terms of profitability and growth) of the selected firms and
the researchers ended up by concluding that most of the actions of eco-innovation influence the firm
positively. Furthermore, the research investigation by Antonioli et al. (2016) appraised the
impact of resource efficiency strategies on the performance of the chosen firms from the region
of Emilia Romagna (Italy) for the period of two years from 2010 to 2011. The investigators
concluded by these outcomes that the performance of the selected firms (revenue over the
labor cost) is positively influenced by the resource efficiency actions.
On the contrary, in oppose to these favorable research investigations concerning the impact
of resource efficiency actions on the firm’s financial performance, some research studies
evaluated inverse relationship. The researchers disclosed that there is no association between
these two variables (resource efficiency actions and firm financial performance) and even
there is no any substitution between these both variables of interest. For example Cainelli et
al. (2011) investigated the relationship of eco-efficiency and financial performance (in terms
of turnover) and employment growth of the selected firms by focusing on the service
industry of Italy and examined an inverse relationship between these three variables of
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interest. The researcher put focus on the service industry of paper in subsequent of four
European countries (Italy, Germany, United Kingdom and Netherlands). In addition (Wagner
& Wehrmeyer, 2002) also presented the proof by exposing a negative correlation between eco-
innovation strategies and a specific firms’ financial performance (in terms of return on
capital) measure. In this investigation, the researchers concluded that there is no any support
to determine the association between return on equity (ROE) and return on sales (ROS).
According to the source of copyright investigation, the researchers (Marin & Lotti, 2017) used a
recent sample of manufacturing Italian firms and examined that eco-environmental actions
show less returns as compared to other innovation strategies, at least for the period of short
time. The effects of diminishing returns are particularly accurate for the firms which pollute
the environment because these firms confront the more barriers of incurring costs for
compliance to the rules and regulations of environmental institutions than those of the other
organizations (Martinez et al., 2016). Under the framework of evolution and emerging
economies, some proof are also presented that by adopting the better tactics to restrict the
pollution, the firms of Czech Republic did not improve the manufacturing processes nor
damage the financial performance (Earnhart & Lizal, 2007).
Moreover, beside this widespread research studies that generally examine the relationship of
eco-innovative strategies and the performance of firm only, there are some other
investigations which have suggest that most research studies examined the link of
environmental practices and firm performance but ignored the different types of eco-
innovation strategies and the individual relationship of these actions with the firm
performance. Therefore it is needed by the era that the researchers should further evaluate
the said link by differentiating the various kinds of eco-environmental tactics as well
(Vogtlander et al., 2017; Thollander et al., 2007).
Ghisetti and Rennings (2014) investigated by considering a German sample, elaborated that
there are two different situations of eco-innovation strategies, the first one is the impact of
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externalities whereas the other one is to increase the resource and energy effectiveness. The
econometric investigation proposes that the innovations that decrease the energy and material
utilization have a positive impact on firm performance in shape of higher returns. Whereas
the innovations that reduce the utilization of air and water and eliminate the noise pollution
and harmful substances, generate the inverse impact. Two other research studies proved the
same conclusion by utilizing the similar German data for the year 2009. Rexhauser and
Rammer (2014) performed the same practice as mentioned earlier, whereas (Marshall &
Williams, 2019) revealed the similar results by using the sample of approximately 3,000
listed firms over 58 different countries.
Furthermore, a couple of other research studies elaborated the diversified conclusion
concerning the relationship of eco-innovation actions on the firm performance. Doran and
Ryan (2012) investigated by decomposing the eco-environmental variables into different
nine types of eco-environmental practices performed by the Irish firms. These research
studies disclosed that there are only two types of these strategies (recycled waste, water, or
materials) which positively impact the firm performance (turnover per worker). These
research studies recommended for becoming more resource efficient or advocated that the
concerned patrons of productions need to be determined again. Likewise, the research
studies (Vogtlander et al., 2017) investigated the possible factors which determine the
relationship of eco-environmental and the firm performance by using the Dutch firms. These
studies presented that the resource saving strategies generate a positive impact on the
productivity of selected firms. However, the pollution reduction and end of life strategies
decreased the production (Zhao & Alexandroff, 2019).
With regard to the firm performance and sale growth, various research studies which
inspected the function of eco-environmental strategies to enhance the firm expansion is still
minute as compared to the rest of the investigations (Zafar et al., 2018) when it is compared
to other research studies which focused on the growth impacts of other common innovations.
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However, the technical eco-innovation strategies are usually distinguished as the main
causes to generate the firm growth (Coad, 2009). Therefore, the ultimate impacts of eco-
environmental strategies are still not clear and gain less intention of researchers (Colombelli
et al., 2015).
Catarino et al. (2015) examined and found an inverse relationship between the eco-
environmental strategies and the growth by utilizing the sample of Italian firms, concerning
the turnover and employment for the short run. Although, the research study (Colombelli et
al., 2015) analyzed by implementing the sample of about 400,000 firms of France, Germany,
Spain, Italy and Sweden for the period from 2002 to 2011. The researchers explained that
those firms which are concerned to the specific eco-innovation strategies are gaining the
higher level of growth whereas those firms which are carrying the general eco-innovations
tactics are generating the lower growth.
However, the subsequent of three hypotheses have been developed to understand the
overall blended results of these research investigations for determining and evaluating the
relationship between resource efficiency actions and the firm performance. By reviewing
the existing research literature, the first hypothesis based on the overall arguments
mentioned above, is:
2.1 Hypothesis 1 (H1): The resource efficiency actions have a positive impact on the financial
performance of SMEs.
The second hypothesis is connected with some other modern research studies which
proposed that there is a necessity to examine the strength of environmental strategies
instead of the impact of their adoption (Antonioli & Mazzanti, 2009). In view of the fact
that the production cost initially tends to increase in the short run by investing in resource
efficiency actions whereas it tends to become optimum for the period of long run (Llopis &
Blasco, 2018). Therefore, the subsequent has presented as a second hypothesis, based on
the results of above mentioned research studies, is:
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2.2 Hypothesis 2 (H2): The production cost moderates the link of resource efficiency actions
and financial performance of SMEs.
Antonioli and Mazzanti (2009) presented that the intensity of investment in eco-innovation
also plays a moderating function to determine the firms’ production, while insignificant
effect has been found for the adoption and implementation of investment in eco-efficiency
actions. Thus the proportion of investment (Llopis & Blasco, 2018) in resource efficiency
actions also affects the relationship between resource efficiency actions and firm
performance, thus the third hypothesis based on aforementioned studies, is:
2.3 Hypothesis 3 (H3): The eco-investment moderates the link of resource efficiency actions
and financial performance of SMEs.
These aforesaid three hypotheses are to be tested by implementation of multiple
econometric analyses presented in methodology section. These statistical analyses become
possible because the dataset, consisting of resource efficiency actions of the small and
medium size enterprises (SMEs), accumulated from the questionnaires which are to be
gathered from the survey of small and medium size enterprises (SMEs) located in North
side of Lahore Pakistan.
2.4 Literature Summary
The eco-efficiency actions have the valuable effects on environment but its impact on the
financial performance of small and medium size enterprises (SMEs) is complicated. There
are multiple research studies, elaborated in the section of literature review, which identified
the relationship of resource efficiency actions and the firm financial performance of the
sector of small and medium size enterprises (SMEs). The results of some research studies
disclosed that there is a positive relationship between resource efficiency actions and the
firm financial performance whereas the results of some research studies revealed the
inverse relationship of these both variables. All of these research studies considered the
time span to understand this relationship where it tends to be positive in the long run and
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negative in the short run. Some researchers considered that the investment in resource
efficiency actions will compensate the operating costs and therefore enhance the firm
performance for the long run. The well designed eco-efficiency actions can motivate the
innovated procedures which enhance the firm’s performance by increasing the overall
productivity of the firms. It is known as Porter Hypothesis, the eco-efficiency is a mode
that can give benefits to the firm by enhancing the economic and environmental
performance. Thus, it attracts the attention of researchers as it opposes the conventional
thought which states that the eco-efficiency actions do always impact the economic growth
negatively (Brouwers 2009; Jenkins 2009; Murillo and Lozano 2009; Battaglia et al.,
2010).
Llopis and Blasco (2018) described that the appearance of diversified and miscellaneous
answers can be elaborated in a number of dimensions, for instance, the possibility of
investigation (individual firm or cumulative level, large or small sample size), the diversity
of firm performance determinations (development, productivity and profitability), the
combination of various indicators for measuring the eco-environmental strategies (hygienic
technologies, end of life tactics, avoidance of contamination, procedures of resource
efficiency etc.) and the experimental methods implemented. Barbieri et al., (2018) refered
with reference to the accumulation of concerned data and information; the research studies
generally use one of the two possible techniques of data gathering to assess the financial
impacts of eco-environmental strategies: the copyright data or the questionnaires. The first
one though important but it is restricted since the copyrights can be twisted towards
advancement in bigger firms, whereas the small or medium size enterprises are not
integrated in this type of data gathering. Hence, the second type of data gathering will
ultimately be the most suitable way to accumulate the statistical information related to the
sector of small and medium size enterprises (Ayandibu & Houghton, 2017).
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Chapter No. 3
METHODLOGY
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3.0 METHODOLOGY
In this section of methodology, the specific process or procedure to classify, choose,
process and examine the information about an area of interest is presented. This portion is
developed to critically assess an overall reliability and validity of the research study. Thus
it answers two main streams of the queries: how the statistical facts and figures (the data)
been collected? And how these facts and figures been analyzed and evaluated (Ryan et al.,
2002)? Therefore, the forthcoming paragraphs will be consisting of related definitions of
different terminologies along with the analysis and interpretation of multiple
investigations.
3.1 Conceptual Framework
The conceptual framework is in fact the general understanding of investigator that how the
specific variables (dependant or independent) used in the research study have an
association with each other. As a result, it identifies and defines the variables particularly
required in carrying the research investigation. It ultimately guides the entire research
activity, therefore, it provides an overall “diagram” that can guide the reader to realize the
purposes or intentions of the researcher of concerned research study. In this research study,
the financial performance of small and medium size enterprises (SMEs) has been treated as
a dependent variable and a number of multiple variables (including, saving water, saving
energy, renewable energy, saving material, minimizing waste, selling to other firms, and
recycling etc.) have been treated as an independent or explanatory variables. To understand
the theory, based on previous research studies and literature, appropriately, the subsequent
conceptual models (diagram No. 1.1 and 1.2) must be comprehended thoroughly:
3.1.1 Model No. 01
Here in the first model, the relationship of resource efficiency actions and firm’s financial
performance of small and medium size enterprises (SMEs) has been assessed whether it is
positively associated with each other or vice versa. The research question and hypothesis
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(H1) addressed in the portion of introduction section (under the heading No. 1.12 and No.
1.13) is presenting the same relationship. Afterwards, the moderating role of eco-
investment which influence the relationship (determined in the first step) of resource
efficiency actions and financial performance of small and medium size enterprises (SMEs)
is also to be evaluated. Consequently, keeping in view the research question and hypothesis
(H2) number 02 of this research study, the following model (diagram No. 1.1) has been
drawn.
Indepen
dent
Variable Moderating Dependant
s Variable Variable
Saving Water
Saving
Eco-Investment
Energy
Renewable Energy
Saving Material Firm Performance
Minimizing Waste
Selling
Firm Characteristics
Scrap
Recy
cling
Control
Variable
Diagram No. 1.1
3.1.2 Model No. 02
In the second model drawn below, the study intends to evaluate the moderating role of
production cost which affects the relationship of resource efficiency actions and financial
performance of small and medium size enterprises (SMEs). As it has been mentioned
earlier, the production cost intends to rise due to an increase in eco-investment for the short
run but afterwards it starts to decrease for the long period of time. The same ideology has
been drawn in the following diagram (No. 1.2) that after determining the relationship of
resource efficiency actions and firm performance of small and medium size enterprises
(SMEs), the affect of production cost has also been put forward for understanding its
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moderating role. For that reason, the following model (diagram no. 1.2) has been drawn by
concentrating on the research question and hypothesis (H 3) number 03 of this research
study.
Indepen
dent
Variable Moderating Dependant
s Variable Variable
Saving Water
Saving
Production Cost
Energy
Renewable Energy
Saving Material Firm Performance
Minimizing Waste
Selling
Firm Characteristics
Scrap
Recy
cling
Control
Variable
Diagram No. 1.2
3.2 Definitions of Various Terminologies
In order to understand this research study appropriately, the following four definitions
(resource efficiency actions, small and medium size enterprises (SMEs), green product and
services along with the firm performance) are to be understood for further implementations
of statistical and econometric techniques.
3.2.1 Firm Performance
The firm’s financial performance is an appropriate area of interest in finance research and the
same is commonly used as a dependent variable. The factors such as firm’s profitability,
overall growth, customer satisfaction, employee’s retention, social and ecological performance
are some of the factors to determine the firm’s financial performance (Llopis & Blasco, 2018).
There are two other aspects which must be considered in order to define the firm performance:
time frame and reference point. It is possible to differentiate between past and future
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performance; the previous performance does not promise that it will also remain the same in
future. Another issue related to time is the duration of the interval (short, medium or long) has
been considered. The specified reference against which the firm’s financial performance is
being measured, e.g. the industry average, the results of direct competitors, an established
target and the previous performance, is also important.
3.2.2 Resource Efficiency Actions
Woolman and Veshagh (2006) defined eco-efficiency as “a combination to save the raw
materials, energy and water; reduce the dangerous materials; decrease the quantity and
intensity of wastes during the manufacturing and production process.” The natural resources
together with renewable and non-renewable metals and minerals, energy, water, air, biomass
and land, are some key factors of production (Pekanov et al., 2017). Restoration and
preservation of the health and condition of these resources by integrating the resource
efficiency actions is a key element of sustainable development (Begum et al., 2014). United
Nations Environment Program (UNEP) has recognized the term “resource efficiency” to
incorporate the technical competence of resources used; the amount to which the economic
value is inserted to a given quantity of resources and the level to which the resource extraction
has negative effects on the environment.
3.2.3 Small and Medium Size Enterprises
The small and medium size enterprises (SMEs) are the firms whose numbers of workers fall
below the certain limits. The short form of "SME" is used by the international organizations
such as the European Union, the World Bank, the United Nations and the World Trade
Organization (WTO) as well. These are the autonomous firms with not less than 50 workers.
On the other hand, the maximum number of workers is different from one country to another
country. For most of the companies, the upper limit of workers can be around 250. Some
developed countries refer the total number of workers up till 200. The US defines a small and
medium size enterprise (SME) with having no more than 500 employees.
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3.2.4 Green Product and Services
The questionnaire for collecting data has been started with a terminology known as green
product and services. According to Begum et al. (2014), the green products and services mean
having the good quality, performance and convenience with no harmful impacts on an overall
environment. Pekanov et al. (2017) affirmed that as opposed to the brown economy, the
resource constrictions and inverse environment changes led to develop the green economy that
was the demand of the era. Llopis & Blasco (2018) elaborated that the larger firms have
identified the significance of green economy for generating new opportunities and economic
growth, whilst most of the small and medium size enterprises (SMEs) are yet in the course of
evolution to it. The large firms intend to execute the green procedures easily than the small
firms since they have adequate resources. The green production has less environmental
impacts but more expensive than non-green production (Pekanov et al., 2017). It is
worthwhile to realize that no manufacturing and production will be 100% green ever, because
the product development process will ultimately have some negative effects on adjacent
environment. Consequently, the green products are (Begum et al., 2014):
a. Energy efficient, durable and have low maintenance requirements.
b. Free of Ozone depleting chemicals, toxic compounds.
c. Often made of recycled materials or renewable and sustainable sources.
d. Obtained from local manufacturers or resources.
e. Biodegradable or easily reused either in part or as a whole.
3.3 Source of Data
The small and medium size enterprises (SMEs) generally furnish a very little information
concerning their tactics, strategies and the financial performance (Brouwers, 2010). These
small and medium size enterprises (SMEs) are typically not bound to publish their reports
and are also not restricted to get their accounts audited from any charted firm. Therefore,
no appropriate source is available for any researcher to get the statistical data or
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information. The statistical facts and figures are to be gathered through primary data
collection methods, i.e., questionnaires (in case of literate focal person) or interviews (in
case of language barrier).
3.4 Time Frame and Data Type
When, the data is gathered, researcher must need to identify the time span for what the
particular data needed to be collected and the analyses are to be run and interpreted for
only that specific period of time. Moreover, the types of data which have been accumulated
also need to be categorized whether the same figures belong to panel, times series or cross
section since the statistical and econometric techniques are to be identified as per data
types.
3.4.1 Time Frame
The information related to resource efficiency actions concerning the small and medium size
enterprises (SMEs) has been gathered through the questionnaire just for the year of 2019 only.
The focal person of the concerned small and medium size enterprises (SMEs) will be provided
a questionnaire (if he/she is literate enough to read, understand and response appropriately) to
be filled in accordingly. Whereas in case if the focal person is not literate and confronts the
barriers of second language, a concise interview will be conducted by the student and the
questionnaire will be filled in simultaneously. The procedure of distribution of questionnaires
and gathering information will approximately need at most one month.
3.4.2 Data Type
In this research study, the data type is time series since a series of different small and medium
size enterprises (SMEs) have been included in the sample to determine the firm’s financial
performance for the same year i.e., 2019. The accumulation of statistical information is rather
too tough in the area of small and medium size enterprises (SMEs) as this sector is not
restricted to establish their annual accounts and also not bound to get their accounts audited by
any audit firm.
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3.5 Sampling Method or Data Source
The sampling methods used were convenient and purposive sampling which are the non-
probability sampling techniques, a researcher utilizes to select a sample of elements
from a population that is suitable and appropriate according the requirement (Etikan,
2016). These techniques are helpful when a researcher has inadequate resources, limited
time and scarce workers. These methods are also employed when the research does not
plan to produce the results of generalizations. Total 60% small and medium size
enterprises (SMEs) out of 150 have been included in the sample. These small and medium
size enterprises (SMEs) are the production industry dealing in iron and steel products
whereas the small and medium size enterprises (SMEs) related to services and
manufacturing of other products have not been included. Although there are several others
small and medium size enterprises (SMEs) in other provinces but all of those firms have
not been included in the sample.
3.6 Type of Questionnaire (Structured and Closed Ended)
The various sorts of closed ended questions have been included in the said questionnaire in a very
suitable way so that the relevant statistical facts and figures can further be extracted from the
provided information. All the questions have properly been structured and closed ended in order to
gain the appropriate information related to resource efficiency actions whether the same are being
carried out by the concerned small and medium size enterprises (SMEs) or not accordingly.
Moreover, the appropriately possible options have also been provided under each and every
question so that the questionnaires may easily be filled in by the concerned focal persons by
drawing the tick and mark tactics.
3.7 Research Approach
Keeping in mind the above mentioned hypotheses of this research study and the statistical data
gathered through the questionnaires, this dissertation aims to implement the quantitative approach
chosen to determine the resource efficiency actions and their overall effects on financial
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performance of small and medium size enterprises (SMEs). The questionnaires are to be filled in
by the research student himself through interviewing the representative or focal person and
ultimately the relevant variables are to be determined for further implementation of statistical or
econometric techniques:
3.8 Variables
Whenever, any researcher intends to explore a problem, the related factors need to be
identified and disclosed in order to specify the boarder concept to narrow down all the
concerned features. Moreover, identifying the variables facilitate the researcher to
streamline the procedure throughout the research process. The variables are characteristics
of some objects that can take different values (as compared to constants). The
experimenters, when conducting research, manipulate the variables (Dromer, 1969). Thus
these are the quantities which increase or decrease over the time period and take different
values in different circumstances, therefore the terminology of variables have been used to
represent them. Following are the main variables of this research study.
3.8.1 Dependant Variable
It is a variable that is directly or indirectly affected by some other variables which are
known as independent variables. It is basically the main variable and area of interest for
what the entire procedure of research is conducted. Because, it depends on independent
variables therefore it is called as dependant variable. In any kind of scientific experiments,
one cannot have a dependent variable without an independent variable. As a matter of fact,
it is what a researcher measures in the experiment and what is directly or indirectly
influenced during the research experiment. In this research study, the Firm Performance
has been considered as a dependant variable.
3.8.2 Explanatory Variables
The explanatory variable is a kind of independent variable. These two terms are frequently
used interchangeably. It is, in fact, a factor that directly or indirectly causes a variation in
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dependant variable. In reality, there may be many explanatory variables which collectively
cause a variation in dependent variable. In this research study, the subsequent variables are
the independent variables. Following are the variables being used as independent variables
in this research study.
3.8.2.1 Saving the Water
The society needs to formulate several changes in order to get the planet till the last and one of
those changes refer to the saving of water and if it is practiced broadly, it can be helpful for
mitigating the risks of drought. An important distress in the entire world is to develop an
overall administration of water resources. However, the efficiency in water utilization is
different from the concept of water conservation as it just focuses on reducing the wastage of
water, not restricting its use. When the water is considered to be save, it means measuring the
quantity of water to reduce its utilization required for a specific job and the specified amount
of water that is actually delivered or used in order to save inappropriate wastage. With a better
understanding of how much water is used in manufacturing locations, the saving of water can
be attained by the industry. There are various combinations which include altering the
behavior, transforming or replacing the equipments for reducing an overall water utilization
and to increase its internal reuse.
3.8.2.2 Saving the Energy
The manufacturing facilities are one of the major consumers of energy. All those efforts which
improve the energy efficiency are the increasing concerns for almost all the engineering
managers of manufacturing facilities. The saving of energy is the exertion to decrease the
consumption of energy by implementation of energy efficiency (using minimum energy for a
constant job). The energy is used ineffectively and incompetently with an unnecessary
generation of wastage and pollution as well. Pakistan is one of those countries which
consistently facing the deficiency of energy constraints. In this critical situation, the firms
irrespective of the fact whether bigger of smaller, must need to alter their manufacturing and
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production processes. The energy conservation is a part of the concept of eco-sufficiency that
refers to utmost reduction in the need for energy to increase the environment quality. It proves
that 51% of different businesses consider the tax credits, loans and grants are some of the best
measures to encourage the investments in the field of energy efficiency.
3.8.2.3 Renewable Energy
To guarantee a sustainable energy potential, the utilization of renewable energy sources and
relevant technologies must need to be extended not only for generation of electricity but also
by the end use sectors of buildings, transportation and industry as well. Pekanov et al. (2017)
elaborated that the energy cumulated from the renewable resources is sunlight, wind, rain,
waves and geothermal heat. The sustainable development refers the renewable resources to be
utilized wherever it is possible and other nonrenewable resources need to be reduced and
recycled to expand their feasibility. The renewable energy provides the energy in four
important areas: generation of electricity, water and air heating / cooling, rural and
transportation energy services. The renewable energy can raise upto around 27% of total
consumption of final energy for global producing and manufacturing facilities by 2030 by
assuming the availability of low cost and sustainable biomass sources along with the decreased
capital costs for emerging technologies as well.
3.8.2.4 Saving the Material
Reducing the material waste in fact refers to the better resource efficiency, minimum pollution,
and greater profits. In other words, it is utilizing the material that improves the environment
throughout the product life cycle and it can carry the strategies of cost savings significantly.
Before a firm eliminates the raw material waste, it must need to be able to recognize it. In
order to do this, each and every phase of the manufacturing and production process must be
addressed and tracked. The multiple issues for example the usage of raw material, production
of waste, consumption of energy and its releases to the atmosphere must need to be considered
at each level of the product life cycle. This procedure plays a key role to minimize
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environmental impacts, enhance the material recyclability and increase its efficiency. Saving
material can ultimately lower the cost of production and thus consequently it impacts the firm
performance over the long period of time.
3.8.2.5 Minimizing the Waste
By decreasing or removing the generation and elimination of injurious and continual wastes,
the waste minimization helps the endeavors to encourage a more reliable and
sustainable society. The minimization of waste is also known as source reduction to use less
material and energy to lessen the waste generation and protect natural resources. Blackburn
(2004) elaborated that reducing the waste generates multiple new opportunities due to
enormous economic benefits. Minimizing waste is broader concept than recycling since it
integrates the ways to prevent materials from wastage before recycling. The appropriate
treatment for waste management and disposal of the wastage can ultimately require a
considerable amount of time and a plenty of resources. Therefore, the benefits of waste
minimization can ultimately be significant if carried out in an effective, safe and sustainable
approach.
3.8.2.6 Selling Scrap Material to Another Company
In the most fundamental sense, scrap is the discarded material from a manufacturing job. The
scrap might also be consisting of some small parts and otherwise unimportant materials,
considering these substances are in fact leftover and also not needed again. As a matter of fact,
the metal shredding, for example, are generally considered the scrap. The combine metal
shavings or shredding is not to be a financial hurt for any business. Over the time, however,
these shredding and shavings can be added up which can ultimately cost the firm large money.
The components, known as scrap, are important if they can be put to other uses. Sometimes the
scrap materials can ultimately be used as these materials must be processed before they can be
reused. The plant operators normally perform the function of trash collectors at the cost of
manufacturers. Instead of manufacturing, these plant operators gather the scrapped materials to
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be recycled, reused or discarded. By facing local and foreign competitors who previously are
able to manufacture the parts at a significantly lower cost, the manufacturers cannot afford the
extra labor costs occurred on handling excessive scrap. Hence, the scrap material is sold to
other companies to save the cost of recycling as well as to gain some monitory value out of
these scraped materials.
3.8.2.7 Recycling
It refers to the recyclable materials which are left over from a manufacturing, production and
consumption, for instance, the parts of vehicles, various building supplies and remaining
materials. These substances certainly have some monetary values, particularly when the
recovered metals and nonmetal materials are recovered for this purpose. However, it is the
procedure of converting the waste materials into new. It is an alternative to waste disposal that
can save the material and lower the greenhouse gas emissions. Recycling can prevent the waste
of useful materials and reduce the consumption of fresh raw materials. As per the research
conducted by United States Environmental Protection Agency, the recycling of metals can be
beneficial for the environment. By using the recycled metals in place of fresh iron and steel, the
world can be able to yield:
1. 75% savings in energy. 4. 40% reduction in water use.
2. 90% savings in raw materials used. 5. 76% reduction in water pollution.
3. 86% reduction in an air pollution. 6. 97% reduction in mining wastes.
Every ton of new steel made from scrap steel saves:
1. 1,115 kg of iron ore. 3. 53 kg of limestone.
2. 625 kg of coal.
Energy savings from other metals include:
1. Aluminum savings of 95% energy. 3. Lead savings of 65% energy.
2. Copper savings of 85% energy. 4. Zinc savings of 60% energy.
3.8.3 Moderating Variables
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It is a third variable which is usually denoted as “M” that affects the strength of the relationship
between the dependent and independent variables. In other words, a moderator is usually a third
variable that affects the correlation of two variables. Following are the moderating variables of this
research study.
3.8.3.1 Eco-Investment
An investment is a financial asset purchased with the idea that the asset will provide benefit in
future. It can be the capital investment to start a business or any strategic business unit.
However in this study, the eco-investment refers to the amount incurred for maintaining the
resource efficiency actions. Antonioli and Mazzanti (2009) argued that the extent of eco-
investment in ecological efficiency actions also plays a moderating role to determine the firms
overall productivity and the future strategies related to securing the environment. When a firm
invests in making the strategies to be a resource efficient firm, its production costs start to
increase for the short period of time. If the firm continues to invest in these strategies, the
production cost ultimately starts to decrease for the long run and therefore the firm financial
position eventually tend accordingly.
3.8.3.2 Production Cost
Pekanov et al. (2017) referred to the cost incurred to make a product as a production cost. This
cost included the direct labor, direct materials, consumable production supplies and factory
overhead. Deichmann and Zhang (2013) insisted that to motivate the firms, especially small
and medium size enterprises (SMEs), to be more effective in decreasing their production cost
and to increase their resource efficiency, the governments can use some economic instruments,
for instance, environmental taxation (ecotax) to encourage the energy savings. At the outset,
when a firm initiated to perform resource efficiency actions, the production cost will tend to
increase for the short period of time but afterwards it will eventually start to decrease to a
specific level. In this research study, the production cost has been treated as a moderating
variable where it is to be determined that by implemented the resource efficiency action how
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the production cost reacts. Furthermore, any increase or decrease in the production cost does
moderate the link of resource efficiency actions and firm’s financial performance.
3.8.4 Controlled Variable
A controlled variable is one which the researcher controls during an experiment. It is also known
as a constant variable which is neither a dependant variable nor the independent variable but it is
important because it can ultimately have an overall effect on the end results. It is generally not a
part of an overall experiment but it is still important because it can ultimately have an effect on the
end results. If the control variable changes during a research experiment, it might invalidate the
correlation between the dependent and independent variables. If it is possible, the control variables
should be identified, measured and recorded with their relevant results. The subsequent variable is
being used as a controlled variable.
3.8.4.1 Firm Characteristics
The firm characteristics such as firm size, firm age, technical skills and external support etc.
which generally determine the nature of a firm paradigm within which it has been operating is
business. These characteristics have collectively been considered the controlled variables in
this research study. These variables have been analyzed in determining the annual turnover of
thee selected small and medium size enterprises (SMEs).
3.8.5 Measurement and Statistical Tools
In this research study, the subsequent statistical and econometric tools will be implemented in order
to evaluate the relationship of resource efficiency actions and financial performance of SMEs as
well as the moderation effects of investment and production cost on the relationship of above
mentioned dependant, independent and moderating variables.
3.8.5.1 Descriptive Statistics
It is a summary statistic that quantitatively describes or summarizes features of a collection of
information, while descriptive statistics is the process of using and analyzing those statistics.
Descriptive statistics is distinguished from inferential statistics (or inductive statistics), in that
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descriptive statistics aims to summarize a sample, rather than use the data to learn about the
population that the sample of data is thought to represent. This generally means that descriptive
statistics, unlike inferential statistics, is not developed on the basis of probability theory, and are
frequently nonparametric statistics. Even when a data analysis draws its main conclusions using
inferential statistics, descriptive statistics are generally also presented.
3.8.5.2 Correlation Analysis
It is any statistical association, though it commonly refers to the degree to which the pair of
variables is linearly related. Correlations are useful because they can indicate a predictive
relationship that can be exploited in practice. For example, in this research study the correlation
of various resource efficiency actions will be examined with the financial performance of
SMEs. The most common of these is the Pearson correlation coefficient, which is sensitive only
to a linear relationship between two variables (which may be present even when one variable is
a nonlinear function of the other).
3.8.5.3 Regression Analysis
It is a set of statistical processes for estimating the relationships between a dependent variable
(Financial Performance of small and medium size enterprises) and one or more independent
variables (saving water, renewable energy, saving material, saving energy, minimizing waste,
selling scrap and recycling). Regression analysis is primarily used for two conceptually distinct
purposes. First, regression analysis is widely used for prediction and forecasting, where its use
has substantial overlap with the field of machine learning. Second, in some situations regression
analysis can be used to infer causal relationships between the independent and dependent
variables. Importantly, regressions by themselves only reveal relationships between a dependent
variable and a collection of independent variables in a fixed dataset.
3.8.5.4 Ordinal Regression Analysis
The ordinal regression analysis (ordinal classification) is one of the statistical techniques to be
applied to forecast the behavior of dependent variables of ordinal level along with the set of
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independent variables as well. The ordinal regression analysis is used when the dependent
variable consists of the order response category whereas the independent variables are
consisting of the categorical nature of data instead of continuous. The illustrations of ordinal
regression analysis are the ordered probit and ordered logit. It is generally used in
the curriculum of social sciences, for instance, in this research dissertation, the response of the
focal person of small and medium size enterprises (SMEs) to a specified question has been
provided multiple options to be checked (on a scale from 1 to 4) to fall within a particular
information retrieval. For instance, it has been asked that what was your turnover last year? For
this specific question, the categories (1. Rs. 100,000 or less, 2. Rs. 100,000 to Rs. 500,000 3.
Rs. 500,000 to Rs. 1 million 4. Rs. 1 to Rs. 5 million 5. Rs. 5 million to Rs. 10 million 6. More
than Rs. 10 million) were provided. The concerned focal persons have checked on the one
particular category and have done the same for rest of the questions as well. In machine
learning, the ordinal regression is also called ranking learning.
3.8.5.5 Moderated Ordinal Regression Analysis
It occurs when the relationship between two variables depends on a third variable. The third
variable is referred to as the moderator variable or simply the moderator. The moderators are
often used to examine when an independent variable influences a dependent variable. That is,
moderated models are used to identify factors that change the relationship between independent
and dependent variables. Moderation analysis in the behavioral sciences involves the use of
linear multiple regression analysis or causal modeling. To quantify the effect of a moderating
variable in multiple regression analyses, regressing random variable Y on X, an additional term
is added to the model.
3.8.5.6 Multiple Moderated Ordinal Regression Analysis
The multiple moderated ordinal regression analysis will also be implemented in order to
examine the relationship of dependant variable (i.e., annual turnover) and two moderating
variables (i.e., production cost and eco-investment) in single equation and table.
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3.8.5.6 MS Excel and SPSS
The accumulated data and information will be managed through utilizing Microsoft Excel (a
spreadsheet program included in the Microsoft Office suite of applications) and the same data
has also been imported and converted into SPSS for further statistical and econometric analysis
mentioned above to analyze the descriptive statistics. The platform of SPSS has also been used
for execution of econometric operations of correlation, ordinal regression analysis and
moderated ordinal regression analysis as well as the techniques for resolving the econometric
problems of data, accordingly.
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Chapter No. 4
RESULTS
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4.0 RESULTS
In this chapter, the results of different statistical and econometric analyses, for instance descriptive
statistics, correlation analysis, ordinal regression analysis and multiple ordinal regression analysis
were conducted through the SPSS, have been presented in a concise manner. The related
descriptions and interpretations of these analyses have also been elaborated at the end of each table
in order to make it convenient to comprehend the important statistical facts and figures. In the
subsequent first section, the analysis of descriptive statistics has been furnished where the overall
characteristics of small and medium size enterprises (SMEs) are discussed briefly.
4.1 Descriptive Statistics
It helps to understand and describe the characteristics and features of a detailed data set by
providing the concise summaries concerning the whole sample as well as the different measures of
the data set. The most recognizable categories of descriptive statistics are the measures of center:
the mean, median and mode, which are generally used at almost all levels of mathematics and
statistics. All the Ninety (90) small and medium size enterprises (SMEs) which have been included
in the sample have been performing the resource efficiency actions in order to be the competitive
and resource efficient firms. The following are some of the necessary tables, extracted from the
SPSS and arranged in the same sequence as the questions in the questionnaire, to understand the
overall firm characteristics (control variable) related to those small and medium size enterprises
(SMEs) included in the sample.
4.1.1 Does your company offer green products or services?
The focal person of total one hundred and fifty (150) small and medium size enterprises (SMEs)
have been provided the questionnaires where some firms regretted to furnish the information of
their concerned firms whereas all of those firms which straight forward disclosed that their
manufacturing companies do not implement the strategies of resource efficiency, have been
excluded. Therefore, the final sample consists of only those ninety (60% of responses out of 150)
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small and medium size enterprises (SMEs) affirmed that these companies are acting as resource
efficient firms by compliance with the concerned strategies.
4.1.2 For how long has your company been selling green products or services?
1. Less than 1 year 2. 1 to 3 year
3. More than 3 years
Each firm has been asked that for how many years it has been producing and offering the green
products or services where three categories have been provided in order to understand the exact
period of time in which the concerned firm is performing the resource efficiency actions. The
following table provides the related statistics.
Table No. 2.1
Cumulative
Duration Frequency Percent
Percent
Less than 1 year 11 12.2 12.2
From 1 to 3 year 43 47.8 60.0
More than 3 year 36 40.0 100.0
Total 90 100.0
Description: There are eleven (11) firms (12.2% of total sample) which have been implementing
the resource efficiency actions for the period less than one year, whereas forty three (43) small and
medium size enterprises (47.8% of total sample) have been performing the strategies to save the
resources for the period from one to three years, and thirty six (36) small firms (40% of total
sample) have been offering the green products for more than the period of three years.
4.1.3 The small and medium size enterprise (SME) belong to following sector
1. Manufacturing 2. Retail
3. Services 4. Industry
It has been questioned that to which sector of industry the responding firm belongs to. Since, the
firms which are manufacturing the iron and steel products are to be included in the sample where
the service, retail and other industry have not been included in the sample. The subsequent table is
disclosing the same figures.

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Table No. 2.2
Cumulative
The Sector of SME Frequency Percent
Percent
Manufacturing 71 78.9 78.9
Industry 19 21.1 100.0
Total 90 100.0
Description: There are seventy one (71) small and medium size enterprises (78.9% of total sample)
which stated that these firms belong to manufacturing sector whereas nineteen (19) companies
(21.1% of total sample) claimed that these firms belong to the sector of industry. Irrespective of
their statements, it has been observed that all the small and medium size enterprises (SMEs) belong
to the manufacturing sector instead of any industry.
4.1.4 The size of small and medium size enterprise (SME)
1. 01 to 09 employees 2. 10 to 49 employees
3. 50 to 249 employees 4. 250 or more
The small and medium size enterprises (SMEs) have been asked to disclose their size by indicating
the number of their employees. The four categories had been furnished to tick on one of these
options. This question will provide the opportunity to check the association of firm size with the
annual turnover of the concerned firm (mentioned in the chapter of results). The maximum number
of workers (in the context of SMEs) is different from one country to another country. For most of
the companies, the upper limit of workers can be up to around 250. Some developed countries
refer the total number of workers up till 200. The US defines a small and medium size enterprise
(SME) having no more than 500 employees.
Table No. 2.3
Cumulative
Size of the SME Frequency Percent
Percent
1 to 9 employees 16 17.8 17.8
10 to 49 employees 74 82.2 100.0
Total 90 100.0
Page 57 of 92
Description: These small and medium size enterprises (SMEs) disclosed that the sixteen (16)
companies (17.8% of total sample) consist of one (01) to nine (09) employees carrying the
manufacturing process whereas seventy four (74) firms (82.2% of total sample) fall within the
category which deploy from ten (10) to forty nine (49) employees. Consequently, the rest of the
options remained unmarked since none of the firms fall in these both categories.
4.1.5 In which year small and medium size enterprise (SME) was established
This is the single open ended question included in the questionnaire in order to understand that in
which year the firm has been established and when the same firm has started the implementation
of resource efficiency actions. The following table is presenting the frequency of small firms
against the year in which these firms have commenced their business.
Table No. 2.4
Cumulative
Year of Commencement Frequency Percent
Percent
1999.00 1 1.1 1.1
2000.00 3 3.3 4.4
2001.00 5 5.6 10.0
2002.00 2 2.2 12.2
2003.00 1 1.1 13.3
2004.00 1 1.1 14.4
2005.00 4 4.4 18.9
2006.00 3 3.3 22.2
2007.00 2 2.2 24.4
2008.00 2 2.2 26.7
2009.00 5 5.6 32.2
2010.00 10 11.1 43.3
2011.00 9 10.0 53.3
2012.00 9 10.0 63.3
2013.00 5 5.6 68.9
2014.00 6 6.7 75.6
2015.00 9 10.0 85.6
Page 58 of 92
2016.00 8 8.9 94.4

2017.00 3 3.3 97.8
2018.00 1 1.1 98.9
2019.00 1 1.1 100.0
Total 90 100.0
Description: In above mentioned table (Table No. 2.3), the frequencies and percentages of ninety
(90) firms have been presented against the year in which these small and medium size enterprises
(SMEs) had been established but it does not mean that these firms also started the implementation
of resource efficiency actions in the same year.
4.1.6 Over the past two years, has your company's annual turnover increased, decreased or
remained unchanged?
1. Increased 2. Decreased
3. Remain Unchanged
Here, the small and medium size enterprises (SMEs) are inquired about the tendency of annual
turnover to comprehend the propensity by furnishing the three categories where the trend of
annual turnover, by implementing the resource efficiency actions, showed an increase, decrease or
remained unchanged.
Table No. 2.5
Cumulative
Tendency Frequency Percent
Percent
Decreased 57 63.3 63.3
Remain Unchanged 33 36.7 100.0
Total 90 100.0
Description: Total fifty seven (57) small and medium size enterprises (63.3% of total sample) have
declared that by implementation of resource efficiency actions, the annual turnover has been
decreased whereas thirty three (33) firms (36.7% of total sample) claimed that the annual turnover
remained unchanged and nothing could create any difference by performing the strategies of eco-
efficiency. The subsequent is graphical representation of the tendency of annual turnover.
Page 59 of 92
Diagram No. 1.3
70
60
50
40 63.3%
30 36.7%
20
10
0
Decreased Remain Unchanged
4.1.7 What was your turnover last year?
1. Rs. 100,000 or less 2. Rs. 100,000 to Rs. 500,000
3. Rs. 500,000 to Rs. 1 million 4. Rs. 1 million to Rs. 5 million
5. Rs. 5 million to Rs. 10 million 6. More than Rs. 10 million
It is the main question where the small and medium size enterprises (SMEs) have been acquired to
check one of the provided six options. The answer of this question will have been examined to
assess its association with a number of other variables, for instance, production cost and eco-
investment etc.
Table No. 2.6
Cumulative
Category Frequency Percent
Percent
Rs. 100,000 to Rs. 500,000 31 34.4 34.4
Rs. 500,000 to Rs. 1Million 59 65.6 100.0
Total 90 100.0
Description: Thirty one (31) small and medium size enterprises (34.4% of total sample) disclosed
that the annual turnover of these firms remained within the range from Rs. 100,000 to Rs. 500,000
while fifty nine (59) firms (65.6% of total sample) have generated the annual turnover set
somewhere between the ranges of Rs. 500,000 to one million. The categories of annual turnover
Page 60 of 92
have been presented in the following diagram that shows the total percentage of the firms fall in
one of the two categories.
Diagram No. 1.4
65.6%
Rs. 500,000 to Rs. 1Million
34.4%
Rs. 100,000 to Rs. 500,000
0 10 20 30 40 50 60 70
4.1.8 To whom your company is selling its products or services?
1. Consumers only 2. Companies only
3. Administration only 4. Consumers + Companies
5. Companies + Administration
Table No. 2.7
Cumulative
Target Sector Frequency Percent
Percent
Companies only 59 65.6 65.6
Consumers & Companies 31 34.4 100.0
Total 90 100.0
Description: There are fifty nine (59) small and medium size enterprises (65.6% of total sample)
which have been selling its products to other companies only whereas the thirty one (31) firms
(34.4% of total sample) have been furnishing their products not only to the companies but also to
the consumers as well.
4.1.9 What actions is your company undertaking to be more resource efficient?
1. Saving Water 2. Saving Energy
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3. Renewable energy 4. Saving Materials
5. Minimizing Waste 6. Selling scrap material to another
company 7. Recycling
Table No. 2.8
Cumulative
Resource Efficiency Actions Frequency Percent
Percent
1, 2 5 5.6 5.6
1, 2, 4 1 1.1 6.7
1, 2, 4, 6 1 1.1 7.8
1, 2, 4, 7 1 1.1 8.9
1, 2, 6 19 21.1 30.0
1, 2, 7 11 12.2 42.2
1, 7 2 2.2 44.4
2, 4, 5, 6 2 2.2 46.7
2, 4, 6 3 3.3 50.0
2, 5, 6 1 1.1 51.1
2, 6 29 32.2 83.3
2, 7 15 16.7 100.0
Total 90 100.0
Description: Twenty nine (29) small and medium size enterprises (32.2% of total sample) have
been performing two resource efficiency actions, namely: saving energy and selling scrap material
to another company. Nineteen (19) firms (21.1% of total sample) have been executing three
strategies, namely: saving water, saving energy and selling scrap material to another company,
whereas fifteen (15) firms 261.7% of total sample) have been carrying out two tactics of resource
efficiency, namely: saving energy and recycling and the other firms so on. The rest of the firms are
also implementing the strategies of resource efficiency but the selection of these eco-efficiency
strategies vary firm to firm. By observing the above mentioned table, it has been disclosed that all
of these companies are concentrating on performing only one action (saving energy) whereas most
of the firms executing the tactics of saving water and selling scrap material to another company
simultaneously.
Page 62 of 92
4.1.10 Your Company involves in following number of resource efficiency actions
1. No Action 2. 1 to 3 Actions
3. 4 to 5 Actions 4. More than 5 Actions
Table No. 2.9
Cumulative
Number of Actions Frequency Percent
Percent
1 to 3 Actions 84 93.3 93.3
4 to 5 Actions 6 6.7 100.0
Total 90 100.0
Description: There are eighty four (84) small and medium size enterprises (93.3% of total sample)
which have been performing from one to three resource efficiency actions whereas only six (06)
firms (6.7% of total sample) have been executing the actions varying from four to five.
4.1.11 Over the next two years, what is the additional resource efficiency actions that your
company is planning to implement?
5. Minimizing Waste 6. Selling Scrap material to another
Table No. 2.10
Cumulative
Resource Efficiency Actions Frequency Percent
Percent
1, 2, 4, 6 1 1.1 1.1
1, 2, 4, 7 1 1.1 2.2
1, 4 6 6.7 8.9
1, 4, 5 11 12.2 21.1
1, 4, 5, 6 2 2.2 23.3
1, 4, 5, 7 7 7.8 31.1
1, 4, 6 4 4.4 35.6
1, 4, 7 4 4.4 40.0
1, 5 2 2.2 42.2
Page 63 of 92
1, 5, 7 6 6.7 48.9
1, 7 3 3.3 52.2
2, 5 2 2.2 54.4
2, 7 2 2.2 56.7
4, 5 10 11.1 67.8
4, 5, 6 2 2.2 70.0
4, 5, 6, 7 1 1.1 71.1
4, 5, 7 10 11.1 82.2
4, 6 2 2.2 84.4
4, 6, 7 4 4.4 88.9
4, 7 7 7.8 96.7
5, 7 2 2.2 98.9
6, 7 1 1.1 100.0
Total 90 100.0
Description: The above mentioned table has been presenting the number of those resource
efficiency actions which these small and medium size enterprises (SMEs) are planning to perform
in the subsequent years in order to become more resource efficient firms.
4.1.12 What are the main reasons why your company is taking actions to be more resource
efficient?
1. Financial and Fiscal Incentive 2. Future Changes in legislation
3. Applications of future changes 4. Demand from Customers
5. Creation of Economic Advantage 6. Catching up with main competitors
7. Cost Savings 8. The environment is priority
Table No. 2.11
Cumulative
Number of Actions Frequency Percent
Percent
1, 5, 7 7 7.8 7.8
1, 6 4 4.4 12.2
1, 6, 7 9 10.0 22.2
1, 7 5 5.6 27.8
2, 6, 7 1 1.1 28.9
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2, 7, 8 1 1.1 30.0
3, 6, 7 1 1.1 31.1
5, 6 5 5.6 36.7
5, 6, 7 8 8.9 45.6
5, 7 8 8.9 54.4
5, 7, 8 3 3.3 57.8
6, 7 33 36.7 94.4
6, 7, 8 2 2.2 96.7
7 1 1.1 97.8
7, 8 2 2.2 100.0
Total 90 100.0
Description: Thirty three (33) small and medium size enterprises (36.7% of total sample) have
provided two main reasons (namely, first: catching up with main competitors and second: cost
savings) to put their efforts to become more resource efficient, whereas the rest of the firms
elaborated the multiple reasons as per their preferences.
4.1.13 What impact has the undertaken resource efficiency actions had on the production
costs over the past two years? The production costs have
1. Significantly Decreased 2. Slightly Decreased
3. Slightly Increased 4. Significantly Increased
5. Remains Unchanged
Table No. 2.12
Cumulative
Percent
Significantly Decreased 1 1.1 1.1
Slightly Decreased 69 76.7 77.8
Slightly Increased 18 20.0 97.8
Remains Unchanged 2 2.2 100.0
Total 90 100.0
Page 65 of 92
Description: Sixty nine (69) small and medium size enterprises (76.7% of total sample) provided
their observations that the trend of production cost showed a slight decrease by implementation of
resource efficiency actions. On the contrary, eighteen (18) firms (20% of total sample) claimed that
the production cost has been examined with a slight increase by performing the strategies to be
more resource efficient firms. The responses of owners have been provided in the following
diagram for an easy and appropriate comprehension.
Diagram No. 1.5
76.7%
80
70
60
50
40
20%
30
20
1.1% 2.2%
10
0
Significantly Slightly Decreased Slightly Increased Remains
Decreased Unchanged
4.1.14 Over the past two years, how much have you invested on average per year to be more
resource efficient?
1. Nothing 2. <10% of turnover
3. 11-30% of turnover 4. >30% turnover
Table No. 2.13
Cumulative
Investment Frequency Percent
Percent
Nothing 1 1.1 1.1
1% of turnover 36 40.0 41.1
2% of turnover 47 52.2 93.3
3% of turnover 6 6.7 100.0
Total 90 100.0
Page 66 of 92
Description: In the above mentioned table, forty seven (47) small and medium size enterprises
(52.2% of total sample) affirmed that 2% of annual turnover has been invested to carry out the
resource efficiency actions whereas thirty six (36) firms (40% of total sample) stated that only 1%
of annual turnover has been invested for implementation of the same strategies. The subsequent is
the bar chart to represent the percentages of eco-investment executed by these small and medium
size enterprises (SMEs).
Diagram No. 1.6
6.7%
3% of turnover
52.2%
2% of turnover
40%
1% of turnover
1.1%
Nothing
0 10 20 30 40 50 60
4.1.15 Overall, how satisfied or dissatisfied are you with the return on the investments you
have made on resource efficiency?
1. Very Satisfied 2. Fairly Satisfied
3. Fairly Dissatisfied 4. Very Satisfied
Table No. 2.14
Cumulative
Percent
Fairly Satisfied 74 82.2 82.2
Fairly Dissatisfied 16 17.8 100.0
Total 90 100.0
Description: In this question, the focal person has been asked to mark the option which shows
their appropriate level of satisfaction attained by investing in resource efficiency actions. Seventy
Page 67 of 92
four (74) small and medium size enterprises (82.2% of total sample) have disclosed that they are
fairly satisfied by the outcomes of eco-investment whereas sixteen (16) firms (17.8% of total
sample) showed a fairly dissatisfaction by observing the results of eco-investment. The following is
diagrammatical representation of the same table.
Diagram No. 1.7
17.8%
Fairly Satisfied
Fairly Dissatisfied
82.2%
4.1.16 Which type of support does your company rely on in its efforts to be more resource
efficient?
1. Financial Resources 2. Technical Expertise
3. External Support
Table No. 2.15
Cumulative
Number of Option Frequency Percent
Percent
1 80 88.9 88.9
1, 2 3 3.3 92.2
1, 3 7 7.8 100.0
Total 90 100.0
Description: All the ninety (90) small and medium size enterprises (100% of the sample) have
shown the insufficiency of financial resources in order to become a resource efficient firm, whereas
seven (07) firms (7.8% of the sample) mentioned that they are in need of technical expertise and
Page 68 of 92
three (03) firms (3.3% of the sample) affirmed that the external support can also be helpful for
attaining the motive to be more resource efficient firms.
4.2 Correlation Analysis
It is a statistical technique which is utilized to find out whether there is any relationship between
two variables and how strong the said relationship is. A high correlation means that two or more
variables have a strong relationship with each other, while a weak correlation means that the
variables are hardly related. In other terms, it means that the correlation analysis is generally used
to examine the quantitative data which is accumulated from primary research methods, for instance,
surveys, questionnaire and interviews, in order to categorize whether there is any significant
associations, patterns or tendencies between two variables. The subsequent table (No. 2.16) is
showing the multiple ranges from very strong to no correlation mentioned against each range.
Table No. 2.16
The coefficient of correlation communicates whether the relationship is very strong, strong,
moderate, weak, very weak or there is no correlation at all. Moreover, the mathematical sign (plus
+ or – minus) mentioned along with the coefficient of correlation shows whether the relationship is
positive or negative. In the following tables, the correlations between annual turnover with
production cost and eco-investment have been presented along with their description, one by one.
4.2.1 Spear’s Man Correlation Analysis
The Spear’s man (rank order) correlation analysis is a non-parametric (the dataset dost not have the
normal distribution) alternative measure to assess the direction and strength of a relationship that
Page 69 of 92
exists between two variables which are measured on at least an ordinal scale. This test is
implemented either for ordinal variables or for the continuous dataset which do not qualify the
assumptions essential to conduct the Pearson's (product moment) correlation. Hence, in all of the
following tables, the test of Spear’s man correlation has been conducted to fulfill the need of
checking the correlation between different variables.
4.2.2 Annual Turnover and Production Cost
In the following table (No. 2.17), the strength of relationship between annual turnover and
production cost has been analyzed. The correlation between the annual turnover and production
cost elaborates that how much strength the relationship of these both variables have.
Table No. 2.17
Annual Turnover and Production Cost TO PC

TO 1.000 .113
Spearman's rho
PC .113 1.000
Description: The relationship of annual turnover with production cost is positive which indicates
that the production cost increases the annual turnover whereas the coefficient of correlation
indicates that the strength of this relationship is very weak and insignificant.
4.2.3 Annual Turnover and Eco-Investment
In the same way, the strength of relationship between annual turnover and eco-investment has
been assessed in the following table.
Table No. 2.18
Annual Turnover and Eco-Investment TO EI

TO 1.000 .582**
Spearman's rho
EI .582** 1.000
Description: The relationship between annual turnover and eco-investment is positive which
indicates that the eco-investment enhances the annual turnover whereas the coefficient of
correlation indicates that the strength of this relationship is moderate and significant.
Page 70 of 92
4.2.4 Eco-Investment and Production Cost
In the following tables, the correlations between eco-investment with production cost have been
presented in order to assess whether these both variables are correlated with each other or not.
Table No. 2.19
Eco-Investment and Production Cost EI PC

EI 1.000 .102
Spearman's rho
PC .102 1.000
Description: The relationship between eco-investment and production cost is positive which
indicates that as the eco-investment increases, the production cost also increases. The coefficient of
correlation indicates that the strength of this relationship is very weak and insignificant.
4.3 Assumptions of Ordinal Regression Analysis
In this research study, the ordinal regression analysis has to be applied where the assumptions of
ordinary least square (e.g., linearity, normality, heteroskedasticity and randomization, etc.) are not
appropriate to be implemented. The ordinal regression has its own assumptions to be tested before
execution of main methodology. It is, hence, necessary to assess the relevant assumptions to make
certain whether it is a valid method or not. The followings are the major assumptions of ordinal
regression analysis which should be checked in sequence:
1. The dependent variable is ranked and ordered
2. One or more independent variables are either categorical or ordinal
3. No multicollinearity
4. Proportional odds
By observing the responses received through the questionnaires, it has been disclosed that the
annual turnover is properly ranked and ordered. It means that the assumption # 1 has been fulfilled.
Moreover, almost all the independent variables are categorical where a number of responses have
been provided against each question. Therefore, the dataset is satisfying the assumption # 1
(dependent variable is ordered) as well as assumption # 2 (one or more independent variables are
Page 71 of 92
either categorical or ordinal). Hence, the assumption # 3 concerning the multicollinearity needs to
be examined. Therefore, the analysis of correlation between all the relevant variables has been
provided in the following table.
4.3.1 Multicollinearity
Table No. 2.20
Multiple Correlation Size PTO TO PC EI SL

Size of the SME 1.000 .113 .397** -.262* .441** -.316**
Previous Turnover - 1.000 -.079 .064 .025 .068
Spearman's Annual Turnover - - 1.000 .113 .582** .092

rho Production Cost - - - 1.000 .102 .379**
Eco-Investment - - - - 1.000 -.148
Satisfaction Level - - - - - 1.000
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Description: The correlation among multiple relevant variables of this research study is either
weak or very weak which represents that there is no multicollinearity issue in the data set.
Therefore the assumption # 3 has not been violated and it is now feasible to conduct the ordinal
regression analysis after verifying the last assumption of proportional odds mentioned below.
4.3.2 Proportional Odds
After assessing the test for multicollinearity through correlation analysis, the Brant Test is to be
implemented in order to check the assumption # 4, proportional odds. This assumption means that
the association between each pair of results must be the similar. If the said association between all
pairs of groups is similar then it means that there is only one set of coefficient which represents only
one model.
Table No. 2.21
Test of Parallel Linesa

-2 Log
Model Chi-Square df Sig.
Likelihood
Page 72 of 92
Null Hypothesis 10.565

General 10.565 .000 0 .
The null hypothesis states that the location parameters (slope coefficients)
are the same across response categories.
a. Link function: Logit.

Description: The test of proportional odds represent that the coefficients, over the model, are same
and therefore the assumption # 4 is also valid. After assessing all the four assumptions of ordinal
regression analysis, the variables are now prepared for further implementation of ordinal regression
analysis so that the relationship of different variables can be determined.
4.4 Ordinal Regression Analysis
It is a statistical technique that is used to predict behavior of ordinal level dependent variables with
a set of independent variables. The dependent variable is the order response category variable and
the independent variable may be categorical or continuous.
4.4.1 Test of Pseudo R-Squared
It is an evaluation which shows that how much the independent variables explain the variation in
dependant variable. The rule of thumb is that a pseudo R2 which ranges from 0.2 to 0.4 indicates a
good fitness of econometric model, but there are some other unexplained factors which can also
explain the variations of dependant variable caused by the independent variables.
4.4.2 Relationship of Annual Turnover and Resource Efficiency Actions
5. Minimizing Waste 6. Selling scrap material to another
Equation: TOi = βO + β1REA + €i
Where:- TO = Turnover (Annual)
REA = Resource Efficiency actions
Table No. 2.22

Page 73 of 92
Std.
Particular Estimate Wald df Sig.
Error
Annual
[Q7 = 2.00] .134 .518 .067 1 .796
Turnover
[Q9=1, 2] -.272 1.049 .067 1 .796
[Q9=1, 2, 4] 19.475 .000 . 1 .
[Q9=1, 2, 4, 6] -19.284 .000 . 1 .
[Q9=1, 2, 4, 7] -19.284 .000 . 1 .
[Q9=1, 2, 6] 1.455 .765 3.623 1 .057
Resource [Q9=1, 2, 7] .693 .813 .727 1 .394
Efficiency
Actions [Q9=1, 7] .134 1.506 .008 1 .929
[Q9=2, 4, 5, 6] 19.475 .000 . 1 .
[Q9=2, 4, 6] 19.475 9150.228 .000 1 .998
[Q9=2, 5, 6] 19.475 .000 . 1 .
[Q9=2, 6] .932 .655 2.025 1 .155
[Q9=2, 7] 0a . . 0 .
Description: The results are multifaceted since there are different combinations of resource
efficiency actions which are being performed by these manufacturing industries. Some of these
combinations are positively associated with annual turnover whereas other few are negatively
associated. Moreover, only two combinations are significantly associated where rest of the
combinations are insignificantly associated with dependant variable (annual turnover).
In this table, the resource efficiency actions are just explaining Table No. 2.23
Pseudo R-Square
22.20% variations in annual turnover. The value of Pseudo R-Square
Cox and Snell .161
(Nagelkerke) is the highest as compared to the values of Cox and Nagelkerke .222
McFadden .136
Snell along with the McFadden R-Square. Link function: Logit.
4.4.3 Relationship of Annual Turnover and Number of Eco-Efficiency Actions
1. No Action 2. 1 to 3 Actions
3. 4 to 5 Actions 4. More than 5 Actions
Equation: TOi = βO + β1NREA+ €i
Page 74 of 92
NREA = Numbers of Resource Efficiency Actions
Table No. 2.24
Std.
Error
Annual
[Q7 = 2.00] -.693 .866 .641 1 .423
Turnover
Number of [Q10=2.00] -.053 .896 .004 1 .953
RAE [Q10=3.00] 0a . . 0 .
Description: In the above mentioned table, the numbers of resource efficiency actions performed
by these small and medium size enterprises (SMEs) are negatively as well as insignificantly
associated with the annual turnover.
4.4.4 Relationship of Firm Size and Annual Turnover
Now, the relationship between turnover and firm size has been determined by using the ordinal
regression analysis. The small and medium size enterprises (SMEs) have a different number of
workforce as per their requirement.
Equation: TOi = βO + β1SZ + €i
SZ = Firm Size
Table No. 2.25
Std.
Error
Annual
[Q7 = 2.00] -1.063 .266 15.954 1 .000
Turnover
SME’s [Q4=1.00] -2.162 .636 11.560 1 .001
Size [Q4=2.00] 0a . . 0 .
Description: This table shows the relationship of annual turnover and size of the small and
medium size enterprises (SMEs). There is a negative but significant association between the size of
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firm and annual turnover since when the size of firm increases, the annual turnover starts to
decrease.
4.5 Moderated Ordinal Regression Analysis
It happens when the relationship of two variables does also depend on another variable, that third
variable is known as a moderator variable. The moderated variables are used to recognize the
factors which modify the relationship between independent and dependent variables. The
moderation analysis in the behavioral sciences involves the use of linear multiple regression
analysis or causal modeling.
4.5.1 Relationship of Production Cost and Annual Turnover
In this study, the hypothesis (H2) states that the production cost moderates the link of resource
efficiency actions and firm performance. In other words, when the production costs increase, how
the annual turnover reacts to the said affect and vice versa. To determine the said statement, the
following equation has been run on the SPSS and the subsequent table has been extracted.
Equation: TOi = βO + β1PC + €i
PC = Production Cost
Table No. 2.26
Std.
Error
Annual
[Q7 = 2.00] 18.418 .632 848.057 1 .000
Turnover
[Q13=1.00] -7.819E-009 9986.617 .000 1 1.000
Production [Q13=2.00] 18.983 .680 778.788 1 .000

Cost [Q13=3.00] 20.027 .000 . 1 .
[Q13=5.00] 0a . . 0 .
Description: The above mentioned table shows that the estimates (-7.819E-009) of production
cost (response No. 01, significantly decreased) has negative and insignificant (P-value = 1.000)
association with annual turnover whereas the production cost (response No. 02, slightly decreased)
Page 76 of 92
has positive (Estimate = 18.983) and significant (P-value = 0.000) relationship with annual
turnover. In other words, it means there is a negative as well as positive association between
production costs of annual turnover. When the production costs slightly decrease, the annual
turnover has its positive and significant association whereas when the production costs show a
significant decrease, the annual turnover has its negative and insignificant relationship.
Keeping in view the outcomes mentioned above, the hypothesis (H 2) is rejected which states that
the production cost moderates the link between resource efficiency actions and firm performance of
Nowhere, the production cost is explaining 13.60% variations in Table No. 2.27
Pseudo R-Square
annual turnover. The value of Pseudo R-Square (Nagelkerke) is the
Cox and Snell .099
highest as compared to the values of Cox and Snell (9.9%) along Nagelkerke .136
McFadden .081
with the McFadden (8.1%) R-Square. Link function: Logit.
4.5.2 Relationship of Eco-Investment and Annual Turnover
The hypothesis (H3) states that the eco-investment moderates the link of resource efficiency actions
and firm performance. It means that when the eco-investment increase or decrease, what will be the
response of annual turnover.
Equation: TOi = βO + β1EI + €i
EI = Eco-Investment
Table No. 2.28
Std.
Error
Annual
[Q7 = 2.00] -19.342 .437 1958.058 1 .000
Turnover
[Q14=1.00] -38.760 .000 . 1 .
Eco- [Q14=2.00] -20.035 .562 1270.006 1 .000

Investment [Q14=3.00] -17.420 .000 . 1 .
[Q14=4.00] 0a . . 0 .
Page 77 of 92
Description: The negative sign of estimates refer to the negative relationship between eco-
investment and firm performance. It means there is a negative association between both of these
variables. The firms which invest 1% have high negative (-38.760) relationship with their annual
turnover whereas the firms which invest 2% have relatively low negative value (-20.035) and the
firms which invest 3% annually have the lowest negative association (-17.420) with their annual
turnover. In other word, higher the rate of annual eco-investment, lower the negative relationship of
these both variables and vice versa. Moreover, it is also statistically significant since (P-value =
0.000) and therefore there is negative but significant relationship between eco-investment and
annual turnover over.
Bearing in mind the results mentioned above, the hypothesis (H 3) is rejected which states that the
eco-investment moderates the link between resource efficiency actions and firm performance of
The eco-investment is explaining 43.60% variations in annual Table No. 2.29

Pseudo R-Square
turnover which is quite appropriate. The value of Pseudo R-Square
Cox and Snell .316
(Nagelkerke) is the highest as compared to the values of Cox and Nagelkerke .436
McFadden .295
Snell (31.6%) along with the McFadden (29.5%) R-Square.
Link function: Logit.
4.6 Relationship of Satisfaction Level and Annual Turnover
Furthermore, it has been determined that how much the satisfaction level an owner is able to attain
by investing in the resource efficiency actions and what sort of relationship these both variables
have with each other.
Equation: TOi = βO + β1SL + €i
SL = Satisfaction Level
Table No. 2.30
Std.
Error
Page 78 of 92
Annual
[Q7 = 2.00] -1.099 .577 3.621 1 .057
Turnover
[Q15=2.00] -.544 .626 .756 1 .384
Satisfaction
[Q15=3.00] 0a . . 0 .
Description: This table shows that there is a negative but significant association between the
satisfaction level (for return on eco-investment) of manufacturer and annual turnover. It means that
the manufacturers’ satisfaction concerning the return on eco-investment has negative relationship
with annual turnover. As much as the manufacturers were expecting the return of eco-investment to
be the resource efficient firms, as a matter of fact, that level has not been provided by the
implementation of resource efficiency strategies.
4.7 Multiple Moderated Ordinal Regression Analysis
At the closing stages, the last test of multiple moderated ordinal regression analysis has been
implemented in order to examine the relationship of dependant variable (i.e., annual turnover) and
two moderating variables (i.e., production cost and eco-investment) in single equation and table.
4.7.1 Relationship of Turnover with Production Cost and Eco-Investment
In the following table, the relationship between annual turnover and production cost and eco-
investment has been assessed by using multiple moderated ordinal regression analysis.
Equation: TOi = βO + β1PC + β2EI + €i
PC = Production Cost
EI = Eco-Investment
Table No. 2.31
Std.
Error
Annual
[Q7 = 2.00] -.076 .859 .008 1 .929
Turnover
[Q13=1.00] -3.285E-008 .000 . 1 .
Production
[Q13=2.00] 18.651 .802 540.31 1 .000
Cost
[Q13=3.00] 19.711 .000 . 1 .
Page 79 of 92
[Q13=5.00] 0a . . 0 .
[Q14=1.00] -38.145 .000 . 1 .
[Q14=2.00] -19.494 .582 1120.69 1 .000
[Q14=3.00] -16.934 .000 . 1 .
Eco-
Investment [Q14=4.00] 0a . . 0 .
Description: The production cost is positively and significantly associated with annual turnover
whereas the eco-investment is negatively and significantly associated. Since both of these variables
are significant, therefore, the hypothesis # 2 and # 3 have been rejected which state that the
production cost and eco-investment moderate the relationship of resource efficiency actions and
annual firm performance.
At the end, the production cost and eco-investment are mutually Table No. 2.32
Pseudo R-Square
explaining 48.20% variations in annual turnover which states the
Cox and Snell .349
overall model fitness. The value of Pseudo R-Square (Nagelkerke) is Nagelkerke .482
McFadden .333
the highest as compared to the Cox and Snell with McFadden values. Link function: Logit.
Page 80 of 92
Chapter No. 5
SUMMARY
CONCLUSION
IMPLICATION
Page 81 of 92
5.1 SUMMARY
In this dissertation, the significance of resource efficiency actions under the context of small and
medium size enterprises has been highlighted. The impact of these strategies practiced by these
small firms to be the resource efficient, has been assessed in connection with the financial
performance of these firms belong to iron and steel manufacturing sector and operate in countryside
of Lahore Punjab. Pakistan is one of the emerging economy and making progress gradually but in
these developing countries, the firms irrespective of their sizes whether smaller or bigger, generally
do not have compliance with the resource efficiency tactics voluntarily. The primary data collection
method (i.e., questionnaires) has been used since their concerned financial information is not
available anywhere. Total one hundred and fifty (150) questionnaires have been provided to the
focal persons of these firms where the data of ninety (90) firms have been received. The collected
data has afterwards been analyzed through SPSS and performed some appropriate statistical and
econometric techniques (for instance, descriptive statistics, correlation analysis, ordinal regression
analysis and multiple ordinal regression analysis). The firm’s financial performance in terms of
annual turnover has been considered as a dependant variable and total seven variables (i.e., saving
water, saving energy, renewable energy, saving material, minimizing waste, selling scrap along
with recycling) are the independent variables. The moderating role of two more variables (i.e., eco-
investment and production cost) has also been examined. The main motive was to assess the effects
of seven resource efficiency actions on the annual turnover of these small and medium size
enterprises (SMEs) whether there is a positive and significant relationship between these variables
or vice versa. Furthermore, the consequences of increasing and decreasing in eco-investment and
production cost which fluctuate the relationship of dependant and independent variables, have also
been presented. The contents and material have been effectively managed within five chapters,
namely introduction, literature review, methodology, results along with the summary, conclusion
and implications, at the end.
Page 82 of 92
5.2 CONCLUSION
The outcomes of this research study are somehow positive as well as negative which support the
both school of thoughts which state that the implementation of resource efficiency action does not
affect the financial performance of the firms and contrary to this view, the financial performance
of firms is positively or negatively affected by the strategies performed to be the resource efficient
firms (these concepts are thoroughly elaborated in the chapter of literature review). In the
beginning, the resource efficiency actions negatively affect the firm performance for the short
period of time but these can turn into positive results gradually if implemented on continuous
bases for the long period of time, consistently. The sector of small and medium size enterprises
(SMEs) has its own nature of hurdles and constraints which ultimately result in the inverse
consequences. As per the findings of Przychodzen and Przychodzen (2015) who selected various
Polish and Hungarian firms, recommended that all the strategies of resource efficiency do not
generally impact the firm performance positively. Ghisetti and Rennings (2014) stated that the
strategies of eco-innovation which aim to reduce the utilization of air and water and eliminate the
noise pollution and harmful substances, generate the inverse impact. With regard to the firm
performance and sale growth, various research studies which inspect the function of eco-
environmental strategies to enhance the firm expansion is still minute as compared to rest of the
investigations (Zafar et al., 2018). Likewise, the research studies (Vogtlander et al., 2017)
investigated the possible factors which determine the relationship of eco-environmental and the
firm performance by using the Dutch firms. These studies present that the resource saving
strategies generate a positive impact on the productivity of selected firms. However the pollution
reduction and end of life strategies decrease the production (Zhao & Alexandroff, 2019). Hence,
the findings of this research study are also recommending the same concept that there no major
association between resource efficiency actions and firm performance. Moreover, the eco-
investment and production cost do not fluctuate the link between both of the variables.
Page 83 of 92
5.3 IMPLICATIONS
The result of this research study is worthwhile to be implemented on the paradigm of small and
medium size enterprises where these firms confront multiple constraints, for instance financial
scarcity, investment or portfolio technicalities, technological expertise and private or
governmental subsidies etc. These firms are even providing the opportunity of employment to the
workforce of the rural areas of the country and contributing its efforts to uplift the economic
prosperity in the country. Despite of these positive aspects, these small and medium size
enterprises generally do not agree to implement the eco-efficient strategies voluntarily. In these
firms the resources are wasted due to the out dated infrastructure, operating procedures and
manufacturing processes. The implementations of resource efficiency actions need the initial and
operating investments consistently along with the continuous training and motivation of the
workforce. These extra tasks are generally felt responsible for increasing the burden of
manufacturing activities for what these firms consider themselves most likely to face inverse
situations for their business. The outcomes of eco-efficiency actions do not positively associate
with the firm performance in the short period of time and need a constant eco-investment for a
long period of time to be turn from negative to positive. When, if the management of these firms is
provided the appropriate awareness and knowledge along with the supporting evidence regarding
the efficient and effective utilization of multiple resources by elaborating the competitive benefits
of the resource efficient firms, the excessive utilization and wastage of these important resources
can be prevented. The saving of these crucial resources is ultimately beneficial and favorable for
domestic and national economic progress irrespective of the fact whether these variables have a
positive or negative association with the firm’s financial performance or not. The resource
efficient firms can be able to secure the ultimate reimbursement in terms of completive advantage
over the other firms if these firms become ready to perform the resource efficiency actions
voluntarily, where the monetary outcomes will be the bonus.
Page 84 of 92
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64+36
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APPENDICES
SURVEY COVER LETTER
SME’S SURVEY
RESOURCE EFFICIENCY ACTIONS
PROFILE OF SME
Q1- Does your company offer green products or services?
1. Yes 2. No
Q2-For how long has your company been selling green products or services?
1. Less than 1 year 2. 1 to 3 year 3. More than 3 years
Q3-The SME belong to following sector
1. Manufacturing 2. Retail 3. Services
4. Industry
Q4-Size of the SME
1. 1 to 9 employees 2. 10 to 49 employees 3. 50 to 249 employees
4. 250 or more
Q5-In which year SME was established: -----------------------------------------------------------
Q6-Over the past two years, has your company's annual turnover increased, decreased or
remained unchanged?
1. Increased 2. Decreased 3. Remain Unchanged
Q7-What was your turnover last year?
1. 100,000 rupees or less 2. 100,000 to 500,000 3. 500,000 to 1 million
4. 1 to 5 million 5. 5 to 10 million 6. More than 10 million
Q8-To whom your company is selling its products or services?
1. Consumers only 2. Companies only 3. Administration only
4. Consumers + Companies 5. Companies + Administration
Page 90 of 92
RESOURCE EFFICIENCY ACTIONS
Q9-What actions is your company undertaking to be more resource efficient?
1. Saving Water 2. Saving Energy 3. Renewable energy
4. Saving Materials 5. Minimizing Waste 6. Selling Scrap material
to another company 7. Recycling
Q10-Your Company involves in following number of resource efficiency actions
1. No Action 2. 1 to 3 Actions 3. 4 to 5 Actions
4. More than 5 Actions
PLANNING TO IMPLEMENT
Q11-Over the next two years, what is the additional resource efficiency actions that your
company is planning to implement?
1. Saving Water 2. Saving Energy 3. Renewable energy
4. Saving Materials 5. Minimizing Waste 6. Selling Scrap to another
REASONS
Q12-What are the main reasons why your company is taking actions to be more resource
efficient?
1. Financial and Fiscal Incentive 2. Future Changes in legislation
3. Applications of future changes 4. Demand from Customers
5. Creation of Economic Advantage 6. Catching up with main competitors
7. Cost Savings 8. The environment is priority
Page 91 of 92
PRODUCTION COST
Q13-What impact has the undertaken resource efficiency actions had on the production
costs over the past two years? The production costs have...
1. Significantly Decreased 2. Slightly Decreased 3. Slightly Increased
4. Significantly Increased 5. Remains Unchanged
INVESTMENT
Q14-Over the past two years, how much have you invested on average per year to be more
resource efficient?
1. Nothing 2. 1% of turnover 3. 2% of turnover
4. 3% turnover
Q15-Overall, how satisfied or dissatisfied are you with the return on the investments you
have made on resource efficiency?
1. Very Satisfied 2. Fairly Satisfied 3. Fairly Dissatisfied
4. Very Satisfied
SUPPORT
Q16-Which type of support does your company rely on in its efforts to be more resource
efficient?
1. Financial Resources 2. Technical Expertise 3. External Support
Page 92 of 92

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The Impact of Resource Efficiency Actions and Firm Performance, Moderating Role of Eco-

Investment and Production Cost

1.1 Significance of Firm Performance

performance, as a matter of fact, is a multidimensional terminology which may consist of various

organizational performance is (Albertini, 2013). The financial performance of a firm is a suitable

part of concentrations of related researchers in the curriculum of financial studies and it is

1.2 Importance of Resource Efficiency Actions

the natural environment to understand it as a subjective as well as a strategic problem than as an

1.3 Relationship of Resource Efficiency Actions and Firm Performance

on financial performance of small and medium size enterprises (SMEs).

1.4 Tendency of Eco-Investment

expectation of it consumers, stakeholders and shareholders through enhancing the environment

1.5 Phenomenon of Production Cost

producers and manufacturers of these firms.

1.6 Consequences of SMEs Sector

a. Foster the concept of entrepreneurship and sole proprietorship;

d. Use labor intensive production processes than the large enterprises;

e. Boost up the employment and lead to the reasonable distribution of wealth;

1.7 Background of Study

utilization created the need to determine the firms’ manufacturing actions.

1.8 Importance of Study

enterprises and resources efficiency actions along with their relationship.

1.9 Survey for Identification of Resource Efficiency Actions

been used for analysis of descriptive statics simultaneously.

1.10 Statement of Problem

make some strategies to become resource efficient.

1.11 Contributions of Study

1.11.1 Theoretical Contributions

1.11.2 Practical Contributions

1.12 Research Questions

small and medium size enterprises?

actions and financial performance of small and medium size enterprises?

1.13 Research Objectives

other or vice versa.

small and medium size enterprises (SMEs).

from a developing country.

1.14 Research Limitations

be included by lengthening the sample size.

2.0 LITERATURE REVIEW AND DEVELOPING HYPOTHESIS

in agriculture based economies (Ayandibu & Houghton, 2017).

small and medium size enterprises (SMEs):

of employment opportunities, personnel training and general development actions as well.

synchronization between employer and employed.

developing the understanding related to the environmental responsibilities is gradually increasing at

and performance of business (Lee, 2009).

enterprises (SMEs) achieved the success by practicing in eco-efficiency actions such as

producers of this sector to avoid the practices of eco-environmental activities. Wright

in practicing the environment related developments.

enterprises (SMEs), a very least amount of environmental reforms is considered to be

important as compared to the activities of generating revenue and gaining financial

serious challenge in order to make contributions to the sustainable environment of the

corporate sustainability is performing the eco-efficiency strategies (Dyllick & Hockerts,

natural resource at the minimum level voluntarily.

minimizing the negative and inverse impacts.

should be revised effectively and efficiently.

of productions as well. In addition, a drastic transformation in consumption of gas, water, oil,

diversified resources can be optimized (Lentes et al., 2017).

eco-efficiency should combine with the environmental and economic performance

(Schaltegger et al., 2017) and it will ultimately permit a sensible management of

enterprises (SMEs) abilities.

firms will be able to generate potential opportunities to prosper in diversified segments of

management, structure, paradigm and processes of production and manufacturing (Jenkins,